Prizes and Patent Pools an Effective Supplement – Not Replacement – to Patent System

Jun 4, 2009

This week, UN climate change negotiators are meeting in Bonn, Germany for the first official round of United Nations Framework Convention on Climate Change negotiations. The goal of these discussions is to come up with a climate change agreement that can be approved in Copenhagen this December. As part of these meetings, the UN released draft negotiation language which encourages, among other things, a reliance on patent pools as a way of sharing technologies.

Recently, The Global Intellectual Property Center at the U.S. Chamber of Commerce published a report analyzing Prizes and Patent Pools and whether or not they could serve as a viable alternative to the current system. The findings suggest that although both can generate new inventions, their value is as a supplement to the patent system – not a replacement.

Prizes have been instrumental in bringing us products such as canned vegetables, and feats such as Charles Lindbergh's first non-stop transatlantic flight. Over the years, these incentives have evolved to reflect the increasing cost and complexity of modern inventions. In 2004 the Ansari X Prize of $10 million was granted to the team that built the first private venture spacecraft. Clearly prizes serve as additional incentives to inventors and in ways that can benefit society.

Yet the impact of prizes is limited by their size, scope and nature. For example, prizes large enough to replace patents as incentives would likely require significant costs that would inevitably fall upon the taxpayer to fund.  Further, it has also been shown that prizes lack the ability to prolong innovation – once the prize is awarded, the innovation stops. Finally, prizes tend to help foster ideas more than bring concrete, useful technologies to market. Even the aforementioned Ansari X Prize did not deliver a commercially viable product.  Virgin Galactic licensed the patented technology that was awarded the prize and will now invest millions to develop it.

Patent pools are another incentive that can work in concert with the patent system.  IBM, through its "EcoPatent Commons," and other innovative leaders have effectively utilized patent pools as a complement to the current system, but not as a replacement. Originally designed to limit costly litigation, companies also form pools and cross-license their patents on particular technologies in certain situations to create new products in a collaborative manner. This helps engineers and scientists more easily build upon existing inventions covered by patents owned by more than one company.  Patent pools have been successful in developing a number of high-tech inventions too complicated to describe, but ones that have been useful in a variety of applications.

Patent pools can also result in nearly as much litigation as they prevent, and can discourage participating rights holders from developing alternatives, which can harm consumers and society in the long term.

Today's challenges—economic, environmental, healthcare, and so on—require innovation, creativity and an effective process by which new ideas can be developed, brought to market, and improved.  As history demonstrates, Americans have a knack for creativity, and it was our patent system of incentives and protections that have led to many of the world's most amazing inventions. It is this spirit of innovation that will also lift us out of our current economic slump and propel us forward.

Our patent system will play a vital role in our economic advancement.  It is for this reason that it must be protected, if not strengthened.  As the GIPC engages in these UNFCCC negotiations, it is essential that any agreement protect the current patent system. Prizes and patent pools can play their part, but not at the expense of a system that works, that protects individuals' rights and ideas, and that has a long and proven record of success.

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