Empirically – they’re responsible for prior tech revolutions

Before addressing a specific legal or policy debate in the patent system, it is necessary to first review the legal and economic evidence that sets the framework for evaluating the current legal disputes and data. This is important, if only because there is widespread confusion today about the key role of a patent system in promoting innovation and driving economic growth. The patent system has been a key driver of the U.S. innovation economy for over 200 years, as economists, historians, and legal scholars have repeatedly demonstrated.16 The patent system was central to the successes of the Industrial Revolution in the nineteenth century, the pharmaceutical and computer revolutions in the twentieth century, and the biotech and mobile revolutions in the early twenty-first century. Studies have consistently shown that patent systems that secure reliable and effective property rights to inventors strongly correlate with successful innovation economies.17

Dr. Zorina Khan, an award-winning economist, has demonstrated that reliable and effective property rights in innovation—patents—were a key factor in thriving markets for technology in the United States in the nineteenth century.18 Other economists have also identified features of these robust nineteenth-century markets in new technologies—such as an increase in “venture capital” investment in patent owners, the rise of a secondary market in the sale of patents as assets, and the embrace of specialization via licensing business models—as indicators of value-maximizing economic activity that were made possible by reliable and effective patents.19 All of this remains true today: a twenty-first-century startup with a patent more than doubles its chances of securing venture capital financing compared to a startup without a patent, and this patent-based startup has statistically-significant increased chances of success in the marketplace as well.20 These are the academic and scholarly analysis that confirm the everyday experience of what most people have seen in Shark Tank, in which the venture capitalists always ask the entrepreneurs if they have patents for their inventions as a precondition to investing in their new products or services.

The real-world results of reliable and effective property rights—whether in land or in inventions— is extensive private investments, development of new products and services, and the creation and growth of new commercial markets in which consumers benefit from new products and services. These have been the consistent features of the U.S. innovation economy from the Industrial Revolution through today’s mobile revolution. They were made possible by a patent system that was as innovative itself as the inventions it promoted and secured in the marketplace.