My own view of government precludes me from sharing the ultimate goal of a government should initiate a National Network for Manufacturing Innovation (NNMI). I tend toward the Jeffersonian view of government — that government which governs least governs best. I am also a big believer in the power of incentives. In all walks of life what is obtained is what is incentivized. If employees know how they will be evaluated, for example, even a mediocre employee can achieve high marks by performing tot the evaluation. Tax policy is another excellent example, as is the patent system.
For better or for worse, the United States has not incentivized manufacturing. In fact, the incentives associated with manufacturing are to off-shore manufacturing rather than do it in the United States. There are too many bureaucratic hurdles to opening a business in the U.S., particularly a manufacturing facility. Anyone who doubts this needs to read Great Again: Revitalizing America’s Entrepreneurial Leadership.
Our interview took place on Friday, December 14, 2012. During our interview we talked about the nearly constant challenges to gut Bayh-Dole, which is the very foundation of university technology licensing and the piece of legislation called the most successful domestic legislation in the post World War II era by none other than The Economist. We also discussed what it is that universities do and how, despite what the critics say, the basic research done by universities is hardly ready for the marketplace. To read the interview from the beginning please see Part 1.
Without further ado, here is Part II (the finale) of my interview with Todd Sherer.
Todd Sherer, PhD, is Director of Technology Transfer at Emory University. Sherer and his staff in the Office of Technology Transfer manage more than 800 active technologies developed through basic research. But he is not just the Director of Technology Transfer. Sherer is also the current President of the Association of University Technology Managers(AUTM), which has as its core purpose the supporting and advancing of academic technology transfer both within the United States and around the globe.
On December 10, 2012, AUTM published the results of the AUTM U.S. Licensing Activity Survey: FY2011, and the AUTM Canadian Licensing Activity Survey: FY2011. Among the findings of the survey were that the 58 institutions (i.e., 31 percent of the 186 respondents) reported that 2,821 of their licenses paid $662 million in running royalties based on $37 billion in product sales, implying an average royalty rate of 1.8 percent. The survey also contained very positive news about startups founded around university technologies. Some 66 institutions (i.e., 35 percent of the 186 respondents) reported employment of 24,653 by 1,731 operational startups, an average of 14 employees per startup.
Upon receiving the press release I set up an interview with Sherer, which was conducted on December 14, 2012, via recorded telephone call. What follows is Part I of our two-part interview.
A wide variety of credible sources confirm the existence of an inexorable link between the profound historical uniqueness of the American Patent System, the rate and quality of American innovation, the rate and quality of American business and job creation, and the profound historical uniqueness and evolution of the American economy.
Accordingly, changing the US Patent System has measurable and profound effects on the American economy just as surely as changing the Tax Code, the Antitrust Laws, or Trade Policy is routinely relied-upon public policy tools for regulating the American economy.
The verdict is not yet in on the constitutionality of the major changes mandated by the 2011 America Invents Act (AIA) as is reflected in the Constitutional challenge discussed in here and here. More importantly, however, is the fact that the smallest and most innovative entities which create most of the new jobs in America already know that the AIA will undermine the US Patent System, and adversely impact their innovation and their job creation in America. It is imperative that we all understand the impact of the implementation of the AIA in 2013 and particularly the ability of large deep-pocketed Multinational Mega-Techs to game the system in the areas of post-grant review, business-method patents, and enforcement. This should be a year where we take control of the AIA implementation and fix the problematic aspects of the law.
Pulling the plug and letting out the baby with the bath water is ridiculous, on that everyone can agree. What people can’t agree on, surprisingly, is selecting a path for the future from the playbook of winning plays. Time and time again any more “do-gooders” seem to want to call plays from the playbook of plays that have never succeeded. In what universe does that make any sense whatsoever? When will they realize that plays that have not worked have failed for a reason? Success is not overdue. Get a grip!
With a firm grasp of some alternate reality, critics of the patent system, and specifically the critics of software patents, would have the United States forfeit the future in favor of something that has never worked. Curtailing patent rights has never worked to produce more innovation anywhere it has been tried. The inconvenient truth is that there is no evidence that a weaker patent system fosters innovation, but there is overwhelming evidence that a strong patent system does foster innovation, leads to growth, investment from abroad and a growing more prosperous economy. Indeed, weak patent rights virtually guarantee innovation simply won’t happen.
So what is fueling the anti-software patent hatred and ridiculous claims that software patents are somehow evil? It is a particular world-view or ideology that approaches religious zealotry. It certainly isn’t anything that resembles factual truth or reality.
Professor Richard Epstein (left) and Professor Adam Mossoff (right).
Innovation and entrepreneurship are integral to America’s economic strength, and the U.S. patent system has been critical to nurturing this innovation economy. Yet, there are some who continually argue that patents are a hinderance to economic development and the march of innovation. It will come as no surprise to anyone that I don’t believe that to be true. In fact, if you actually look at he hard, cold facts objective individuals would all agree that the a patent system fosters innovation. Patents do not hinder innovation.
What may surprise many readers, however, is that there are actually several well regarded academics who actually agree that the patent system fosters innovation. Yes, that is nearly heretical. Legal academics frequently take positions that would lead to the whittling away of patent rights. Those academics simply ignore the realities that exist in countries where there are no patent systems. They also ignore the reality that innovators require a reasonable rate of return in order to pump money into research and development. In some cases it is many millions, even hundreds of millions of dollars that need to be invested. It is naive to believe that anyone would spend millions or hundreds of millions of dollars without any competitive advantage. If a free rider could just copy and sell for less the creator would lose everything. That is not a model for success. It is a recipe for failure.
A report assembled by the USPTO and the economics and statistics administration (ESA) states that intellectual property intensive industries account for 27.1 million jobs (18.8% of all employment). These same IP intensive industries, which are better defined in the report, also account for $5.06 trillion or 34.8% of the U.S. GDP. See also IP Contributes $5 Trillion and 40 Million Jobs to US Economy. Therefore, it is clear to see the importance of intellectual property within the economy of the United States.
“The first step in winning the future is encouraging American innovation,” said President Barack Obama explains almost two years ago in his State of the Union Address delivered to Congress in January 2011. Innovation is the process through which new ideas are generated and ultimately put into the marketplace. Innovation is one of the main forces behind the growth of the U.S. economy — it spurs national competitiveness.
Innovation and how to foster next generation technologies is a topic of very active discussion within businesses across the country. But how can America continue to be one of the most innovative countries in the world? The rapid adoption of IP management and licensing platforms built around social collaboration seems to lead us to one answer – open innovation. Indeed, with today’s technology allowing for the seamless transfer of information – R&D departments have little to no choice but to begin to embrace the open innovation model and use it to their advantage. Understanding your intellectual assets and being able to capitalize on them in order to generate more revenue must be an important part of managing IP and fostering innovation.
News analysis and op-ed pieces following the $1 billion jury decision in Apple v. Samsung have been filled with reactive statements critical of the US patent system. Apple’s enforcement of its patents may “literally choke innovation” cried one law professor. Others have asserted that holding Samsung accountable for its theft of Apple’s property will prove harmful to consumers. A critic of the decision said that cases like this will require competitors to innovators like Apple to be much more mindful of patents and to “try to avoid or secure rights to [patents]” before bringing a product to market.
What the critics have not explained is how making it easier for a foreign company like Samsung to steal US-born innovation is in our long-term national interest.
Only a few weeks prior to the Apple decision, another American jury handed down a $1 billion judgment in another patent infringement case brought by another American company against a competitor. In that case (which the media ironically paid little attention to), Monsanto – the world’s leader in sustainable agriculture – prevailed in an infringement action involving the theft of its revolutionary seed technology. Just as Apple’s vision and risk-taking in the consumer electronics market revolutionized the industry, Monsanto bet the company on its seed technologies and transformed the business of agriculture. The verdicts in these two cases should not be treated as outliers. Rather, they should be accepted by Americans as foreseeable and desired outcomes of a pro-IP industrial policy America has embraced for decades.