Google has achieved wild success and cultural notoriety by operating under the corporate mantra “Don’t be evil.” But when it comes to patent reforms currently under consideration in Congress, Google — along with several other tech heavyweights — seems to be straying from the company line.
The Patent Reform Act, while purporting to bring efficiency and flexibility to the patent system, would actually water down existing patent protections. This may be good for a few large technology firms, whose products incorporate hundreds or even thousands of patented components. But it will inflict serious harm on small entrepreneurs and research-based health sciences firms, whose livelihoods depend on marketing just a handful of lifesaving inventions.
The tech industry’s support for patent reform makes sense, as these companies are increasingly targeted by unscrupulous patent traders who file suit in plaintiff-friendly districts to extort large settlements. By claiming rights — sometimes dubiously — to just a small portion of a finished product, the manufacture of a larger creation can come to a screeching halt. The proposed legislation would streamline the legal process when these cases are challenged.
But the costs to biotech and pharmaceutical companies are far greater than any efficiencies created by leaner patent litigation. Patent protection provides the security that chemists and other scientists need to undertake the labor- and time-intensive research at the core of drug production.
Patents last between 17-20 years, but the average drug takes about 13 years and $800 million to bring to market. So once a drug hits the shelves, there’s only 4-7 years to recoup hundreds of millions of dollars in development costs. That’s why firms and investors demand the sales exclusivity that a patent guarantees.
Moreover, only about one out of every three drugs is ever profitable. The rest are financial misfires whose losses must be recovered via the success of a handful of blockbuster drugs.
It’s curious that Congress would favor faster software development over new medicines.
Further, it’s not just the pharmaceutical and biotech industries that are threatened by this legislation. For small firms and individual inventors, patents provide the protection to create, develop, and profit from their inventions. In fact, small tech companies are the drivers of much innovation, and currently hold about a third of all patents registered.
The proposed changes to the current legal protections would make it much harder for smaller firms to defend a patent claim. Large tech companies — with their big budgets and seasoned legal teams — would therefore enjoy an enormous advantage.
What’s more, the proposed measure comes with a large price tag. The Congressional Budget Office estimates that it will cost more than $131 million per year to comply with the changes to today’s patent system. Big companies can afford this; smaller ones can’t.
The proposed reforms also place limits on compensation for patent infringement. Such terms allow those with deep pockets to buy their way out of legal woes.
While this change might make lawsuits more manageable for the tech industry, it would drastically undervalue the worth of individual patents on products like pharmaceuticals, where each patented compound can cost millions of dollars to develop.
All innovators could benefit if Congress considered meaningful reforms which strengthen, not weaken patent protections. A strong patent system enables the research and creativity that have produced everything from the paper clip to asthma medication. When considering changes to our current patent system, Congress should give a nod to Google’s mantra and “do no evil.”
Sally C. Pipes is president and CEO of the Pacific Research Institute and author of “Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer.”