Giachino (00:05.0139 - 00:32.0584)
Welcome to IP Protection Matters. I'm your host, Renee Giachino.
Today we are joined by Alden Abbott, Senior Research Fellow at the Mercatus Center and former General Counsel at the Federal Trade Commission. We will be talking today about how we can map out a reform roadmap for strong innovation policy. Alden, welcome to the show. Before we dive into the topic, can you tell us a little bit about Mercatus and what you're up to these days?
Abbott (00:32.0694 - 01:35.0500)
Yes. Thank you, Renee. The Mercatus Center is sort of a market-oriented research outfit, center, that's affiliated with George Mason University. And in particular, it's largely comprised of economists, a few lawyers and policy analysts. And we analyze public policy issues of all sorts. And our philosophy is that to the extent possible, we believe market forces work better than government. The role for government really in regulation should be limited to cases when there's market failures and serious problems. But in many cases, we try and point out how public policy solutions that benefit consumers on the general public can be had by actually reducing government burdens. And my job is to oversee the work at the Mercatus Center dealing with antitrust law and competition more broadly. That's the idea about how laws and regulations make markets more or less competitive.
Giachino (01:36.0009 - 01:51.0599)
I want to make sure that our listeners know where they can go if they want to learn more about your work in the Mercatus Center. So, I certainly want to make sure that they're aware of Mercatus.org. That's the website, Mercatus.org.
Giachino (01:51.0769 - 02:13.0000)
Let's dive in now. You recently wrote about U.S. Supreme Court decisions and foreign developments that pose a danger to America's patent-driven world leadership. Can you educate us a little bit? Give us sort of the two-minute brief version of these cases and developments that you believe pose these dangers?
Abbott (02:13.0001 - 03:57.0000)
Right. From about 2010 to 2014, the Supreme Court issued really three decisions dealing with patent eligibility. What does that mean? The patent law - basically Section 101 of the patent law, which was enacted, the latest version 1950, amended over the years - says basically anything under the sun is patentable. It requires that it be an invention, not just an idea. And that an idea be described, so it can be put into practice. That it be original and novel. But basically subject matter of all sorts can be patentable. There are really no limitations.
So for example, 40 years ago, the Supreme Court said that bacteria, artificially created that can be used for medical purposes, that can be patentable. The real constraint is, is this an original idea? Is it novel? Is it something that goes beyond what's known in the science and engineering, the so-called art, the state of the art? But the Supreme Court started really in three decisions really saying, no, there are additional limitations on what can be patentable.
For instance, the Supreme Court in 2012, in a case called Mayo, said a medical testing patent was unpatentable as strong statutory subject matter. That is, it's not the sort of thing you can patent. And that ... really it didn't give a good justification for that, according to many people.
Abbott (03:57.0100 - 06:04.0480)
Other decisions: Mayo v. Prometheus and Bilski v. Kappos.
In 2014, the Supreme Court unanimously decided that certain things were not patentable. It said an abstract idea can't be patentable. Fine. Everyone knew that. But it said that ... it's necessary to determine whether or not a claim is directed to an abstract idea. And what does that mean? No one really knows.
So suddenly, if you had, say, a mathematical algorithm or some theoretical mathematical application ... to develop better software or better sort of equipment, there was a risk that suddenly this - even though the new equipment described or software was original - it might be held not patentable. And there's been lots of cases out there and lots of confusion.
So there have been efforts, really in the last couple of years, to propose laws that would say, no, we just want to go back to the basic understanding that anything under the sun is patentable. It still has to be novel. It still has to be something beyond the existing prior art, a true invention. But you're not going to invent, to use a term, something that isn't found in the statute.
So recently, medical devices, all sorts of equipment and so on, their patentability has been called into question on subject matter grounds. And the real answer is, no, that should not be the case, because that means it may be harder to get a patent in the U.S. than in foreign countries. And that really will undermine American innovation. More and more inventors will go abroad and say, hey, I have a better chance of getting a patent in, say Germany or even China, for example, than I do in the U.S. because of these strange court interpretations.
Giachino (06:04.0500 - 06:44.0100)
So over the last decade, as you've pointed out, certainly we've seen that marked increase in these court created problems. Whether that's from patentable subject matter to limitations on injunctive remedies. Taking the temperature of Congress, do you think Congress sits in a position ready to address this and to ensure that America remains the patent-driven world leader that we have been? Or are we going to allow, as you just indicated, these patents to be moved abroad? To see them happen in Germany, or worse yet, China?
Abbott (06:44.0299 - 07:30.0000)
Well, that's a very tough, good question. I wish I had a good crystal ball and I don't. I mean, certainly, the good thing is on a bipartisan basis, former heads of the patent office - David Kappos under the Obama administration and Andrei Iancu under the Trump administration - and other former officials on a bipartisan basis, have said, look, innovation is being threatened. Let's get legislation.
There are opponents to legislation, of course. And, and there's always, you know, some industries say, well, we'd like to be able to rely on and to use these innovations without having to pay a patent fee or patent license. So, I wish I knew the answer.
Abbott (07:30.0130 - 09:11.0359)
I know there's an act called PERA which would go to patent eligibility. There's also proposals to deal, you mentioned injunctions. Until 2006, I believe it was ... if you violated a patent right, the law was pretty clear you can be ordered to stop. You can't keep on violating a patent right. You have to stop in your tracks. This is, if you're trespassing and trying to live on someone's property, you can be forced off. You can't stay. Well instead ,.. that was understood, that what was almost automatic. You got an order of that kind. And the Supreme Court said, no, you have to balance a bunch of factors. And that made it much more difficult to protect your patent, because often just getting damages which is just the cost of a patent license doesn't make you whole. So there's legislation that would say, look, if you violate a patent, you can be ordered almost automatically to stop the violation.
And I think there's very strong arguments for that. It's easier to get a so-called injunction to order stopping a violation in Germany, you mentioned, and even in China ... countries you mentioned.
But I hope Congress, on a bipartisan basis, acts. There is some bipartisan support for action. Senator Coons of Delaware is a Democrat, for example, has joined in. But you know, we can't endorse specific bills as a nonprofit. But all I can say is I think these are serious problems. And my personal view is that legislation is really called for. Let's see what happens.
Giachino (09:11.0760 - 09:55.0400)
You happen to mention Andrei Iancu. I had the pleasure of interviewing him just a short time ago as co-chair of the Council for Innovation Promotion. And he talked a lot about the myths vs the facts when we talk about patent thickets, evergreening, and product hopping.
But equally as interesting, something that you just referenced as well, is the bipartisan effort that is underway. And I spoke with John Stanford, the Executive Director of Incubate, and he educated me on a statute that I had not been following, had not heard of, but I think is very relevant to our discussion as well today: Ensuring Pathways to Innovative Doers, the Epic Act. I love the, the acronym alone.
Giachino (09:55.0600 - 10:54.0000)
So, I think you're absolutely right that we can be slightly encouraged by the effort that is underway. And as you mentioned, as nonprofits, we, we can't specifically engage on those issues, but we want to make sure that the listeners are aware of the efforts that are happening out there. Because oftentimes what we really hear more about are the critics who come in.
Some of the critics out there of our current patent system argue that the Bayh-Dole march-in provisions should be expanded. We know that last December, the Commerce Department's National Institute of Standards and Technology proposed a draft framework that would authorize the use of march-in control in overly high price situations. And I believe that you've written about this. Share with us your thoughts on what effect something like that would have in the price control arena on further innovation.
Abbott (10:54.0070 - 12:08.0590)
Well, price controls I think would destroy innovation because it would undermine incentives to try and get a patent.
To briefly explain, the Bayh-Dole Act, which was enacted in 1980 - bipartisan - basically said: If you do research in university laboratories or government laboratories and that original research comes up with a patentable subject matter, you have a right to get a patent. Government has a right to, access to that, the license, but you can get a patent, you can make a profit. And until then, the labs had been underutilized. And now, after that, you had a huge explosion of patentable innovations, and some economists suggest up to trillions of dollars in value was created. Universities made a lot of money off of - MIT, Stanford, others - off of innovations they could get patents on and return on those patents.
But suddenly, if you say that the so-called march-in ... the government is saying, well, if we think the prices of these patent licenses - what you have to pay to use a patentable subject matter - if they're too high, we can set the price or restrict the price.
Abbott (12:08.0600 - 13:06.0000)
Well, price setting, price fixing of this sort, has never worked in human history. It always creates a disincentive to supply something. Whether goods, whether innovation. So that would just mean that it would no longer be profitable to take - particularly for pharma and other firms that take the risky research - to do a lot of risky research in the labs to get only a minimal return. And that again, could restrict this outpouring of innovation, which did so much to lift U.S. economic growth at a faster rate than Europe and other parts of the world starting in the 1980s. And again, it makes, I think, no economic sense. And hopefully wise minds will realize that. Because again, there was bipartisan criticism of efforts to say that now we want to broaden the idea of arbitrarily putting price controls on Bayh-Dole patents.
Giachino (13:06.0085 - 13:32.0215)
Our guest is Alden Abbott, Senior Research Fellow at the Mercatus Center and former General Counsel of the Federal Trade Commission.
Drawing from your expertise in your former role as General counsel of the FTC. Recently, both the Department of Justice and the FTC leadership have raised new antitrust concerns about the exercise of patent rights. Is their reasoning sound?
Abbott (13:32.0300 - 14:18.0237)
Well, I actually don't think so. I mean, it was in particular, there's some guidance on something called "standard essential patents," which are patents that, based on standards, about limiting prices for that. But, more generally, the Federal Trade Commission has said, well, we think there are lots of patents listed before the FDA, Food and Drug Administration, that are not really good patents, and, we think that drugs are too expensive, so, lots of patents listed on this required listing book of patents that cover drugs should be pulled back. And if you do that, you're going to get less investment in drugs and drug research.
Abbott (14:18.0300 - 15:35.0000)
And the FTC, which does not have expertise - nor does the Justice Department - in patents or in science, is telling a scientific body: Well, there are all sorts of patents that should not be patents. It seems to be, this is part of an anti-patent philosophy, that somehow patents our monopolies instead of the property rights they've been. So that advice, we haven't seen any directive, but eventually it's going to have to have some negative effects. Just as the FTC and Justice Department had advised that the last administration's support for full return to patents that read on technical standards - that allowed firms to invest in improving technologies, improving standards - they wanted to, again limit returns you get for that.
So, I would hope that, again ... this should not be a partisan issue. This was, in the past, you know, for decades, again, it was a bipartisan support by the U.S. trade regulators and the enforcers, that patents are good, they're important to our innovation and to American competitiveness.
Giachino (15:35.0344 - 16:06.0960)
I'd like to close out, if we could please, just referring back to the recent article that ran in Forbes that you wrote titled, "The 2024 Patent Landscape and a Roadmap for Future Prosperity." For the listeners who want to dive more deeply into this issue, could you just sum up for us - I know we've talked a lot about some of the actions that can and should be taken - but would you just sum up, in our last closing minutes, outline the four specific federal actions that you detailed that need to be taken?
Abbott (16:06.0960 - 18:13.0060)
Right? Well, thanks for that.
For one thing, I'd say the National Institutes of Standards and Technology, which oversees Bayh-Dole, should endorse the pre-existing understanding that Bayh-Dole march-in should not set prices. So basically, keep Bayh-Dole the way it is.
Second, I think the U.S. Trade Representative should strongly oppose the attempt for a waiver of patents covering COVID medications and drugs. There was an attempt to say, well, there's an international treaty on that, to protect patents. But if you don't protect patents on drugs or other devices to deal with serious diseases like COVID, you're going to get inferior medical outcomes. The U.S. Trade Representative should strongly oppose a waiver.
Third, the Justice Department and the FTC should go back to the approach of the last administration on standard essential patents, re-issue guidance that ensures that federal antitrust enforcement will not interfere with the legitimate exercise of patent rights.
And fourth, the President should state forcefully that ... Chinese attacks on U.S. patent rights will be met with appropriate sanctions. And the Chinese, for example, have tried through lawsuits to limit U.S. patent returns on patent licenses there. They tried to say that foreign countries cannot protect their patents. So, I think we need an allied diplomatic effort to say that China should not try and steal patents or undermine our patented technologies. That's a problem that, that U.S. agencies, including in 2024 have recognized as a problem, but I think it's time for the president, the executive branch to do something decisive about that. So taken, together those four items I think would be very helpful in maintaining our innovative economy.
Giachino (18:13.0410 - 18:41.0030)
Well, thank you so much for your time today, Alden Abbott. You've certainly helped us better understand why we should care about IP protection, why IP protection matters.
Our guest has been Alden Abbott, senior research fellow at the Mercatus Center and former General Counsel of the Federal Trade Commission. Follow his work and the work of the Mercatus Center at Mercatus.org.
Thank you again for your time today. We'd love to have you join us again soon.
Abbott (18:41.0040 - 18:41.0650)
Thank you, Renee.