Patents Without Examination: A Bad Solution For The 21st Century

[Editor’s Note: a Portuguese translation of this article appears on IP-Watch here.]

By Arjun Jayadev and Dean Baker

Brazil has historically been at the forefront of developing countries pushing for a more balanced intellectual property (IP) regime.

Over the past two decades, there has been serious pushback from the developing world against the dominant IP regime. In large part, this is because wealthier countries have sought to impose a one-size-fits-all model on the world, by influencing the rule-making process at the World Trade Organization (WTO) and forcing their will via trade agreements.

Temer’s presidency and its right-wing policies have been met with massive protests in Brazil.

The IP standards advanced countries favour typically are designed not to maximise innovation and scientific progress, but to maximise the profits of big companies able to sway trade negotiations. No surprise, then, that large developing countries with substantial industrial bases – such as South Africa, India and Brazil – have been leading the counterattack.

These countries are fully justified in opposing an IP regime that is neither equitable nor efficient. In a recent paper, for a Shuttleworth Foundation project on access to medicines, and published by Fiocruz in Rio de Janeiro, we review the arguments about the role of intellectual property in the process of development. We show that the preponderance of theoretical and empirical evidence indicates that the economic institutions and laws protecting knowledge in today’s advanced economies are increasingly inadequate to govern global economic activity, and are poorly suited to meet the needs of developing countries and emerging markets.

Even in the United States and other advanced industrialised countries, the patent system is in a period of crisis. There is widespread concern over the proliferation of bad patents — those that are not real advances on existing knowledge. Bad patents can provide an impediment to follow-on innovation, while providing at best weak incentives for innovative activities themselves.

In fields such as information technology, a whole set of bad patents and an epidemic of over-patenting has made subsequent innovation difficult, and has eroded some of the gains from knowledge creation. There is a shrinking of the knowledge commons as even publicly funded and promoted innovation is privatised, thereby reducing both equity and efficiency. There is no agreement on what exactly ought to be done, but it is certainly recognised that the current system is not satisfactory for developed countries.

The central problem is that knowledge is a (global) public good, both in the technical sense that the marginal cost of someone using it is zero and in the more general sense that an increase in knowledge can improve wellbeing globally. Given this, the worry has been that the market will undersupply knowledge and research will not be adequately incentivised.

Throughout the late 20th century, the conventional wisdom was that this market failure could best be rectified by introducing another one: private monopolies, created through stringent patents, strictly enforced. But private IP protection is just one route to solving the problem of encouraging and financing research. It has been more problematic than had been anticipated, even for advanced countries.

An increasingly dense “patent thicket” in a world of products requiring thousands of patents has sometimes stifled innovation, with more spent on lawyers than on researchers in some cases. Research is often directed not at producing new products but at extending, broadening and leveraging the monopoly power granted through the patent.

We recognize that Brazil has a serious problem with a large backlog of patents, but the proposed solution of approving patents without a substantive examination is inviting disaster. While many of the pending patents are surely deserving of approval, it is undoubtedly the case that many are not.

In some cases, people will have filed for patents that overlap with existing patents. This will be an invitation for a large number of lawsuits, as owners of conflicting claims will fight over royalties.

In the same vein, many of the pending patents are almost frivolous. There is a long history of people attempting to patent processes or products that are completely obvious and involve no innovation whatsoever. For example, Amazon attempted to patent the use of one-click shopping online. Granting frivolous patents will both drastically raise costs for Brazilian consumers, as they will then have to pay patent fees for items that should be free, as well as impede further innovation since many areas for research will be far more costly as a result of wrongly granted patents.

The result of this wholesale granting of patents will be to simply move the backlog at the patent office to the legal system, as it virtually guarantees a flood of lawsuits that Brazil’s courts will be unable to deal with.

The current backlog in Brazil is problematic. Pending patent applications can also be harmful for innovation, for competition, and for access to the fruits of innovation. However, the proposed “solution” is not the way to go. It is against Brazil’s historical position to fight for a better balance between public and private and developed and developing countries in the IP system. It is also against theoretical and empirical evidence that shows a more open system could encourage the diffusion of knowledge, leading to economic growth – and thus to gains in human development and welfare. And it is in the opposite direction of what is being done by other emerging economies.

South Africa, for instance, after decades of implementing a non-examination system for the granting of patents, in which the claims only get interrogated if a third party challenged them, is now implementing a major policy shift whose main goal is to end the depository patent system.

An IP regime dictated by the advanced countries more than a quarter of a century ago, in response to political pressure by a few of their most powerful corporations, makes little sense in today’s world. Maximising profits for a few, rather than global development and welfare for many, did not make much sense then, either – but it happened anyway, due to the power dynamics at the time.

Those dynamics are finally changing, and emerging economies are taking the lead in creating a balanced IP system that recognises the importance of knowledge for development, growth and wellbeing. What matters is not only the production of knowledge, but also that it is used in ways that put people’s health and welfare before corporate profits.

Brazil has historically taken good decisions toward that goal. The automatic granting of patents without a substantive examination would send the country backwards.

Arjun Jayadev is Professor of Economics at Azim Premji University in Bangalore and a senior economist at the Institute for New Economic Thinking.

Dean Baker is senior economist at the Center for Economic and Policy Research in Washington, DC. He is frequently cited in economics reporting in major media outlets, including the New York Times, Washington Post, CNN, CNBC, and National Public Radio.

Image Credits: By AmandaLemosNeuroMat [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons, By Rovena Rosa/Agência Brasil [CC BY 3.0 br (https://creativecommons.org/licenses/by/3.0/br/deed.en)], via Wikimedia Commons