Regulatory Challenges for Innovation Policy (Blog Post)

McNair Project

Regulatory Challenges for Innovation Policy (Blog Post)
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An ecosystem supportive of innovation must be competitive but also protective and regulated. Too much trade protection reduced competition thus hurting innovation while too many regulations hurt innovation by prolonging time to move an idea into the market. However, a lack of protection and regulations reduce incentive to innovate by enabling copycat ideas and making it difficult to profit off on innovation. Concurrently, a poorly executed regulatory and protection system, such as making it trivial to patent ideas, can lead to valid innovation being blocked by frivolous legal challenges. There is little doubt as to what happens at the extremes of these spectrums of protection and competition, but the equilibrium necessary for a thriving innovative ecosystem has yet to be found. Where the United States lies on this spectrum is being continually readjusted due to pending legislation and court cases, as well as ramifications from prior legal actions. While the most prominent reform in recent years has been the America Invents Act, a variety of court cases working their way up the legal system may create fundamental changes in how the United States protects and regulates innovation. Pending legislation, chiefly the Innovation Act and PATENT (Promoting American Talent and Entrepreneurship) Act, seek to ameliorate the current intellectual property regulatory environment. The main issue these bills seek to resolve is that of “patent trolls” or in other terms, non-practicing entities. Proponents of these bills contend that reducing legal threats posed by NPEs will expedite innovation while opponents claim the bills broadly define non-practicing entities and such definitions benefit large established corporations while harming small ones. Naturally, large tech companies support such bills while small inventors and non-practicing entities oppose these measures. Effective reform of the US patent system requires balancing the interests of all actors involved. All these parties are active innovators but excessive or insufficient regulation discourages innovation and the willingness to invest in research and development. Since 2016 is an election year and patent policy is not a particularly sexy issue, we can expect little action to reform the patent system from Congress. Patent policy is not a pressing issue for most voters. With that said, many of the major reforms to patent policy has come from court decisions and the next major decision we can expect will regard the constitutionality of inter partes review, or IPR, that was introduced with the American Invents Act of 2011. Inter partes review is a process enabling third parties to challenge the validity of patents based on prior art evidence to an internal patent office board. The case, MCM Portfolio LLC vs Hewlett-Packard, is pending petition from the Supreme Court and can be expected to be heard sometime before the end of 2017. IPR has led to an increase of challenges to the validity of patents and opponents of IPR claim it harms small companies and individual inventors by decreasing intellectual property rights. IPR has made it cheaper and easier to challenge patent claims, but the existence of IPR has not increased the number of patents being invalidated. We can expect a steady trickle of cases attacking provisions of the American Invents Act though the success of such cases cannot yet be predicted. While there are chances of the legislation regarding patent reform to move forward, none of these bills have made much progress in the time since they moved out of committee. The balancing act of protecting intellectual property but also preventing exploitation of those protections has proven difficult to accomplish. At either extreme, the value of patents and, in tandem, incentive to innovation, is diminished.

References

Original text by Avesh Krishna

Link

https://docs.google.com/a/rice.edu/document/d/1Qyp7dnBoGlomGfCa12BnauNF-h_vWvRvDPU2l43XonM/edit?usp=sharing