Patent Reform Should Be Key Part of Our Innovation Agenda

January 11, 2010

For over 200 years, the U.S. has been a home to innovation. We are still celebrated for innovation, but today innovation is more diverse, often more complex, and increasingly collaborative. In addition to product and process innovation, we benefit from new forms of marketing and other business and social activities.

The policy tools we have for encouraging innovation have also grown in scope and complexity. The Constitution authorized patents and copyright “to promote the progress of science and the useful arts.” In the 19th Century, states invested heavily in agricultural research. After World War II, the federal government began making large investments in basic science, as well as in technology for defense. Post-Sputnik, we worked to improve education in math and science. We grant tax credits for “research and experimentation.” We have set-asides for small business, because small businesses are considered more innovative than large businesses.

For innovation to happen, ideas are not enough, there must be real impact. Realizing innovation may require research, practical invention, product development, integration, design, marketing, and/or organizational change.

The federal government seldom invests directly in innovation, except where it supports a recognized federal purpose such as defense. State governments (as well as other countries) have been more adventuresome, sometimes putting money into incubators, technology parks, research consortia, investment funds, regional clusters, research institutions, and region-specific technologies. Yet the federal government plays a critical role in setting the right conditions for innovation. It supports a vast amount of scientific research and data collection. The federal government sets the ground rules for intellectual property, environmental protection, corporate reporting, financial markets, trade, consumer protection, and health and safety standards – all of which shape innovation and competition.

Innovation is key to long-term economic growth through productivity gains and new wealth creation. Innovation enables the U.S. – and the rest of the world – to prosper and to address monumental challenges such healthcare and climate change. At the same time, the United States faces an increasingly competitive global economy in which other traditional advantages are less distinctive. Fortunately, our country has a unique capacity and culture for innovation. The problem is getting the right mix of policies and programs to optimize opportunities, conditions, and payoffs. Not just in manufacturing, but in services, research, learning, and government itself. Resources are limited and old policies and practices do not automatically apply to the growing diversity of innovation. The ecology of innovation is changing rapidly, and we need to know how programs, policies, and practice interact.

The Obama Administration’s Strategy for American Innovation is a big step in the right direction. However, it needs work. It advocates building roads and bridges but ignores the problems of the patent system. While roads and bridges are important to the efficiency of the economy as a whole, the connection to innovation is remote. Whereas the patent system, which dates back to the Constitution, is at the heart of U.S innovation policy, and it needs serious attention.

There is nothing particularly controversial about roads and bridges, but there is plenty of debate about the patent system. Historically, the patent system has been shaped by patent applicants and owners – and especially by the patent bar, which has consistently advocated for more patents, ever stronger patents, and patents for all human activity.

Today, in a global economy that prizes agility, speed, efficiency, and collaboration, the patent system has grown bloated, ideological, and costly. It remains dogmatically one-size-fits-all, despite an ever-growing body of evidence that it works very differently in different fields and conditions. The debate over reform pits industry against industry, upstream against downstream, speculators against service providers, etc. Yet we do not attempt to measure or monitor how the patent system is working, so patent policy becomes a political exercise in which Congress ends up choosing winners and losers.

With the America COMPETES Act up for re-authorization this year, we need a deeper and broader understanding of innovation. The problem with patents is only the most conspicuous manifestation of a general problem. We want more innovation, but our tools for understanding it are increasingly inadequate. Our capacity for innovation has distinguished us, but we live in a time where a rich fabric of competition and collaboration needed to support innovation has become the objective of every enterprising region on the globe. Business as usual, innovation as usual, is not the answer.

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