Drake IP 2013: William Hubbard, “The competitive advantage of weak patents”

Liveblogged from Drake IP Roundtable 2013.

William Hubbard argues that weaker US patents may improve US competitive advantage.

What makes companies competitive? Two relevant issues:

  • Factor conditions – materials, labour; but also advanced factors: information, highly educated labour, specialised infrastructure.

  • Domestic rivalry – domestic rivalry turns out to be more important for global competitiveness because: transaction costs are low (high cross-pollination between competitors); shared programs and infrastructure; gives rise to clusters (related industries – suppliers etc).

Patent law implicates information. It can increase information, but it can also decrease rivalry. US patent law appears to give meaningful incentives to foreign companies, but does not decrease rivalry. Accordingly, foreign companies get the benefits of US patent law, but not the harmful limitations on competition.

US patent law provides the most robust rights in the world; so it provides robust incentives to both US and foreign companies, but only imposes costs on US companies. There is reason to think that we have passed the tipping point that the harms associated with the strength of patent law outweigh the benefits.

Hubbard suggests that we can carefully weaken US patent law. Potential reforms include:

  • Broad recalibrations: industry specific patent reforms may mitigate harfmul side effects (worries about this approach));

  • Harmonizing “down”: weakening down to foreign standards (e.g. eliminating the grace period) (worries that one side does not fit all);

  • Selectively harmonizing “down”: (e.g. expanding experimental use defence).