Reforming the Patent System Toward a Minimalist System
becker-posner-blog.com
becker-posner-blog.com
"Although ending the patent system is a clean solution to all the problems induced by modern patenting, it clearly is not desirable given the importance of industries like the pharmaceutical industry. Since this industry spends on average hundreds of millions of dollars bringing to market a successful drug, pharmaceutical companies would not invest such large sums without the protection of patents (or without other benefits). Probably the best solution would be to maintain the patent system on drugs and a few other products that are expensive to innovate and cheap to copy, and eliminate patents on everything else. In particular, this means eliminating patents in the software industry, the source of much of the patent litigation and patent trolling."
I generally agree with this, but I think it's a little analytically lazy. I think the Supreme Court was right to recognize that we should not just categorically ban certain kinds of patents. Instead, we should articulate the distinctions between the two industries and reformulate the patent eligibility criterion in terms of this distinction.
Patents should be categorically banned.
First, not all research is done by the pharmaceutical industry. In the US, they account for about 36% of research spending[2], behind the government (38%, federal plus state plus local). Note that total funding by the industry (not limited to pharma but including biotech and medical devices) represented 58% in 2007 but the role of patents in those industries is a different debate. The remaining 4% are from foundations and charities.
Next, considering that pharmaceutical companies spend far more on marketing than research and development (typically 25% vs 15% of revenues respectively)[3] and considering that a large part of their revenues comes from public healthcare anyway, one can wonder how hard it would be to replace their R&D spendings with public funds, and get the money back thanks to cheaper drugs,since generics are typically 20% of the brand price.
(BTW I wonder what part of these 15% of revenues spent on R&D is for important research and what part is spent on looking for the next Botox)
Also patents could be replaced with public funding in ways that minimize the impact on the industry, for example by granting prizes for the discovery of important drugs.
[1] http://news.ycombinator.com/item?id=4591766
[2] http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3118092/
[3] http://www.plosmedicine.org/article/info:doi/10.1371/journal...
Also, be careful about misusing the statistic of "drug companies spending more on marketing". A huge part of "marketing" is giving away free samples, which are often used by doctors to help reduce the cost of drugs for low income patients.
Regarding free samples, it's a good point that I overlooked. According to reference [3] above, free samples account for 28% of marketing expenditures. The remaining 72% still represent 18% of revenues spent on pure marketing. So even if all free samples were used by doctors to help the poorer patients, there is arguably more money spent on marketing than R&D.
the economic crisis has put a lot of emphasis on efficacy for inclusion on various formulary schemes, be it private ones like in the US or state-run ones like in EU. now you need an approved product that is also not only marginally better than existing stuff. just takes away some nasty side effect? no reimbursement for you, pharma-economics trumps this.
so, you have run ups of 10 years to line up a single new drug. scientists, the whole approval chain, supply chain, etc. then you get approval and your drug is good enough to be reimbursed, hooray. as the FDA process is public, your generic competitors have been watching - now that you have proven everything, they can flood the market and can undercut you significantly as they do not need to recuperate the initial investment of 10 years.
you have this happen once or twice and then say fuck it. let's play the lottery, better ROI.
the whole patent system was invented for a reason. it makes perfect sense for pharma. abolish it there and drug development will only happen through government programs.
No. If there is a problem with the FDA approval system, let's fix that. Unless it's even more hopeless than reforming (or abolishing) the patent system?
> the whole patent system was invented for a reason.
Yes, but it doesn't matter in the slightest. What matters is what the patent system actually does, and the consequences of removing it. Speaking of which:
> abolish it there and drug development will only happen through government programs.
Probably. However, it may not be so bad if we fix problem A, namely the FDA. Also see "Against Intellectual Monopoly"[1], which talks about the pharmaceutical industry in its 9th chapter.
[1] http://www.dklevine.com/general/intellectual/againstfinal.ht...
Speeding up the process would be dangerous as it is about human health and side effects take time to surface. You want to be really sure before you approve a new molecule. Contergan showed what can go wrong.
And the FDA process being public is a good thing too. Transparency is important. Just like openly documented patent claims.
We could make a Manhattan project dedicated at lengthening healthy life expectancy, for instance (who wouldn't like to live a few more healthy decades?). Or we could grant more money to private parties making promising claims. Or we could grant prizes for achieving particular goals (like finding a cure or a vaccine for such and such disease).
> Transparency is important. Just like openly documented patent claims.
The document is a good thing. The monopoly that goes with it is another matter. Promising a monopoly over inventions speed inventors up, but granting one such monopoly slows everyone else down. Plus the costs induced by the patent approval system, and litigations. I doubt this is a good trade-off.
If we do not want babies born with flippers in this country, then we need expensive approval tests. (Those who don't get the reference should look up thalidomide - which the FDA kept out of the USA.) Those currently cost an average of something like $150 million per drug. The temporary monopoly provided by patents lets us get those costs recouped.
That said I don't think that pharmaceuticals are the poster child for patents. And in a comment on the blog I offered the example of using hookworm to treat Crohn's disease. The FDA has ruled that it would require their approval. But no patent is possible, and therefore nobody is trying to get it approved. And the result is that the most promising known treatment for hundreds of thousands of sufferers of Crohn's disease is, and will remain, illegal to even consider offering in the USA.
The other comments around here show that I was probably mistaken. We probably need the FDA as it is now (or close to that), and we probably need something else to compensate for FDA's unavoidable flaws, and the sheer difficulty of doing research.
It just doesn't need to be patents.
It's not a crutch. It's "we have textbook market failure A, which is alleviated by textbook government intervention B; we can remove the intervention, but we have to substitute one of the other textbook interventions suitable for addressing market failures."
> If there is a problem with the FDA approval system, let's fix that.
First, the FDA approval system is a major but not the biggest cost in getting a new drug to market. Making it dramatically cheaper wouldn't eliminate the underlying problem.
Second, the FDA process is thorough and therefore expensive for good reason. The drug market is problematic because its exceedingly difficult to trace a condition to a particular drug, and because conditions sometimes show up years after treatment with a particular drug.
And the cost of letting a bad drug through is astronomical. A popular drug like Vioxx might be used by 50 million people worldwide. David Graham, and FDA scientist, estimated that Vioxx caused 90-140k preventable heart attacks, and estimated 25-55k preventable deaths from those heart attacks. What's the cost of this damage? How much would you have to be paid to have a heart attack? Remember the target demographic of Vioxx, middle aged men with decent jobs that provide health insurance to be able to afford an expensive medication, is one of the most expensive demographics in terms of lost income from premature death. Between premature deaths and heart attacks, the actual cost of the Vioxx mistake could be $50-$100 billion in the US. Merck had spectacular lawyers and ended up settling for a fraction of that, but that's the nature of class-action settlements--the tortfeasor only ever pays pennies on each dollar of damage their products cause. The public bears the rest of those costs.
Oops. Of course. Thinking of patents as a form of government intervention enlarge the solution space. I was seeing a dichotomy (or spectrum) patent/no-patents, but I did not think about exploring other dimensions.
> First, the FDA approval system is a major but not the biggest cost in getting a new drug to market.
What are the biggest costs? Knowing that could determine the best course of action.
This is faulty logic. There is no direct correlation between money spent to develop, and outcome of desired invention/solution. Name one disease that needs to be treated/cured, and how much more money needs to be spent on R&D to find the solution. Nobody can do that. Ergo, your math does not apply.
When you let free-riding happen, (e.g. ban patents and allow copying of inventions, not to be confused with copying of brand), you let grass-roots innovation happen. More people get to understand the problem domain, more cheaply than any monopoly can manage.
"Cheap to copy" sounds like something to be embraced.
• independent invention should be an absolute defense for infringement, and within a certain timeframe, evidence of obviousness as well
• allow a review process (perhaps when a patent is challenged) where a jury of skilled practitioners is given the same motivating problem brief and a few days to outline possible solutions. Anything they describe would be deemed 'obvious'
Such an invention was definitely 'novel' to the first group, and was also 'novel' (as far as they knew) to the other four teams. But given the state of industry development, it was also 'obvious', because many of the teams that needed it all came up with it in short order.
There's no "progress of the science and arts" benefit from giving an extra monopolistic reward to a team that's just a little bit early (perhaps even earlier than the invention can be deployed). There might be a social benefit from rewarding inventions that can only happen with the promise of the reward.
For example, 'obviousness' could be more expansively construed as being from the perspective the kinds of people "skilled enough they are professionally tasked with inventing new approaches".
The relative preponderance of teams finding a particular solution, versus trying and failing, does seem relevant. (If 2-out-of-2-teams succeed, maybe they are geniuses, but the 100% success rate cannot disprove the hypothesis that the solution is obvious. If only 2-out-of-30 succeed, maybe there's rewardable inventiveness there.)
Still, when there are 2 or more cases of independent invention, that should be economically/legally relevant. This is especially true if one of the inventors didn't pursue a patent. While not be proof of traditional 'obviousness', it is evidence that the invention was "evident enough to be discovered as needed without patent incentives"... which sounds to me like the economically-ideal standard.
(And wouldn't that be a nice counterbalance to the 'patent everything defensively' scramble? That is: by inventing and using something without patenting it, not only would you have an absolute immunity from infringement, but also establish a presumption that specific practice was never deserving of patent protection in the first place.)
Proof of independent invention might not establish a presumption of lack of novelty, but it can help with proof of obviousness. As one author noted a few years ago, "The Federal Circuit has stated that, '[T]he possibility of near simultaneous invention by two or more equally talented inventors working independently,… may or may not be an indication of obviousness when considered in light of all the circumstances.' [Citations omitted] In other words, the fact that another person simultaneously and independently created the same invention claimed in the patent-in-suit can serve as an indication that the invention was obvious." \1
\1 Brent Yamashita [of DLA Piper], Secondary Considerations of Obviousness in a Patent Case: The Seldom-Used "Simultaneous Invention" Factor, at http://www.patentlyo.com/patent/2008/07/secondary-consi.html (omissions in original).
This could be fixed with with the following solution that will maximize public good. There're no good reason for 20 years patent periods in some industries with short cycle of product development, like software, mobile, cloud etc. Cleraly, after first 3-5 years patents start to be either completely useless or slowing down both patent holder's and external innovations. If company is defended by patent, there's no urgency for innovation. This is unfair advantage.
I think software needs a new kind of protection, that issues faster, makes it easier for other people to search, and expires sooner.
Even without patents, we still have copyrights, "dress trade" and other nuances of the legal system, before we really have a worry-free, innovative environment.
God and the compilers bless the brave man to embrace such noble cause.
Maybe every patent application should be provided with a formal proof of how much specific innovation has cost. Declared cost would be verified and accepted by patent office. Consequently, the upper bound of possible damages awarded during a litigation should be set to that amount of money.
Such approach should repel patent trolls twofold. First, since costs of innovation in the software industry tend to revolve around 0, litigations would not be profitable. Second, more troublesome patent application process would decrease the number of issued patents and, statistically, increase their quality, making patents less accessible and useful for patent trolls.
The purpose of a design patent isn't to protect a novel invention that took tons of R&D to develop. Rather it straddles the gap between patent law and trademark law. The purpose is to protect the functional aesthetic of a product.
They are two very different things. A a feature protected by a design patent is supposed to have no functional utility. If e.g. research showed that the "bounce back" feature had the optimal visual feedback in clinical testing, that would actually go to invalidating the patent. The reason they are protected is precisely because they are so arbitrary. There is no need to use something like the "bounce back" feature other than to copy your competitor.
I feel like this needs some substantiation before you springboard off into your argument.