Data disproves patent thickets – existing innovation is because of patents

Although conventional wisdom and classical economics define patents as monopolies by which the incentive to invent is balanced against restraints on access and higher short-term prices, this is a fundamental misunderstanding of the nature and function of patents. Patents and other intellectual property rights, such as copyright and trademark, are not merely incentives to create, but also incentives to commercialize innovation. They are property rights. Thus, they represent an equal opportunity for any person who creates a new invention to secure the fruits of their labors, just like any person who works as a farmer or worker should have secured to them the fruits of their productive labors. Thus, patents, like all property rights, are the basis for commercialization activities, such as obtaining venture capital financing, entering into license deals, and creating new commercial structures for efficiently placing new products and services into the hands of consumers, such as the franchise business model invented by U.S. patent owners in the nineteenth century.

In the healthcare market, for example, this has meant an ever-increasing supply of cuttingedge medical treatments and increasing availability of older medical treatments that are now “off patent.” Patents not only function for companies to recoup billions in investments and thousands of labor hours in creating new drugs and other healthcare innovations, they facilitate extensive licensing and information-sharing agreements that efficiently distribute these healthcare innovations to patients. These extensive manufacturing, commercial distribution, and information-sharing agreements were the launch pad for the unprecedented response by the biopharmaceutical sector in inventing, producing, and distributing billions of doses of the COVID-19 vaccines during the pandemic—an achievement never before accomplished by the biopharmaceutical sector since the invention and patent for Aspirin in 1900 and the invention of vaccines in the 18th century.1 Although drug prices are a subject of policy debate, it is important to recognize that 95% of the essential medicines identified by the World Health Organization are in the public domain; thus, these drugs are available for production by any generic company wishing to sell them in the healthcare market in any country in the world, subject to regulatory approval by health officials.2

In the high-tech sector, the patent system has driven an explosion in new products and services at a rate never before seen in any sector of the global innovation economy. “Several empirical studies demonstrate that the observed pattern in high-tech industries, especially in the smartphone industry, is one of constant lower quality-adjusted prices, increased entry and competition, and higher performance standards.”3 This has occurred in one of the most patent-intensive sectors of the economy.4 This empirical evidence contracted the predictions of academics and economists almost twenty years ago that “patent holdup” and “patent thickets” on smartphones and other high-tech devices would raise prices for consumers and stifle innovation.5

All of this economic and historical evidence creates a strong presumption that reforming patent eligibility doctrine by returning it back to its longstanding function within the U.S. patent system would benefit consumers. Consumers will benefit from the continued creation of new products and services and more jobs. Overall, the U.S. will continue to experience economic growth and a rising standard of living for all consumers.