Tech innovation has long lead times. Current innovation stems from pre-2010 investment. Survey data shows Alice-Mayo has devasted investment since

a. How has the current state of patent eligibility inhibited the development of next generation technologies?

The innovators and companies working in the U.S. innovation economy to create new inventions and to efficiently commercialize these inventions the benefit of consumers have identified the negative impact in their activities wrought by the Mayo-Alice inquiry.7 In one notable study, Professor David Taylor found that “overall 62% of the investors agreed that their firms were less likely to invest in a company developing technology if patent eligibility makes patents unavailable.”8 In fact, Professor Taylor found the most significant “negative impact of the Supreme Court’s eligibility cases generally on investment . . . in terms of its impact on public health: the biotechnology, medical device, and pharmaceutical industries.”9 The negative relationship identified by Professor Taylor between the ill effects of the Alice-Mayo inquiry and investment decisions in new technologies is consistent with numerous economic and historical studies that consistently find a positive relationship between reliable and effective patent rights and economic growth.10

The function of intellectual property rights is to incentive investments in the research and development of new inventions and to incentive investments in the commercial mechanisms to deploy these new innovations in the marketplace. This is an application of the long-recognized economic insight that reliable and effective property rights are a necessary foundation for economic investment and growth of innovation economies.11 Economists and historians have consistently found a strong correlation—the same strong correlation between reliable and effective property rights in land and other tangible assets—between reliable and effective patent rights and growing innovation economies.12

Ultimately, given the function of the patent system as a driver of new technologies and new commercial activities and markets, there is a necessary time lag between the destabilization of the legal reliability of property rights in inventions and the observable impact this has on new technologies. For example, 5G was deployed in the telecommunications sector after approximately a decade of research and development, and the average drug approved for use by patients is the result of approximately 10-15 years and billions of dollars invested in research and development.

The Alice-Mayo inquiry is only ten years old. Thus, as basic matter of economics, we will not observe the full impact of this legal doctrine on next-generation technologies, such as reduced rates of new drugs or of new high-tech innovations in AI or mobile devices, until well after the point in which the negative investment decisions identified by Professor Taylor and others begin to reveal their influence in fewer products and services. This reduction in innovation by the destabilization of patents, or the outright withdrawal of legal security in property rights in new inventions previously protected by the patent system, is not an uninformed predictive theory, it is well-established by economics and history. If Congress waits until after this well-established causal relationship repeats itself in the next decade, it will be too late to undue to the damage in terms of lost innovation, hampered economic growth, and reduced quality of life, especially in comparison to global competitors like China that are implementing legal systems, such as a reliable patent system, for the purpose of displacing the U.S. as the longstanding global technological leader.

b. Can you quantify, in easy to understand terms, the economic impact of the current state of patent eligibility?

The current state of the law is, at best, unpredictable or, at worst, predictable for an inventor who knows that there will be no legal protection in the fruits of one’s productive labors. Given the economic reality of the innovations secured by the patent system, which by necessity are developed into commercial products after many years of research and development, we will not see the specific data on these negative effects until many years after the creation of a legal doctrine. Still, the early evidence in surveys and other reports, as well as the comparative data on rejections of patent applications in the U.S. in which the same inventions were secured by patents in China and Europe, is creating an early picture that confirms what economics and political theory predict will happen to economies when people are not guaranteed rights to property and contract in their work product. In sum, the initial data is demonstrating a trend of reduced patenting, reduced innovation, and ultimately reduced economic growth and technological leadership relative to global competitors like China.