Intellectual Property Directions

Last week, Medical Device Daily National Editor Don Long presented his idea of an improved patent system in The Age of Entrepreneurship vs. the entrenched patent ‘windmill”. From his perspective, the basic concept of the patent system - the ability to exclude others from practicing your invention - is outmoded and prevents important [medical devices] from reaching the patients who could benefit from their innovation. While I agree with his basic tenet, I think his cure would be worse than the affliction. His suggestion for changing the patent system is intriguing, but as with most fundamental changes it comes along with its own set of issues.

Boiling down the idea to its core, the suggestion is to enforce mandatory licensing of patents with the license fee intentionally kept low. I believe this is the system used in music copyrights; if you want to record a cover of someone’s hit you know up front that all you have to do is pay a predetermined license fee. This works in the music space because people don’t buy CDs based on the lyrics/notes per se but rather because they like the specific performance - thus the copyright owner is not really licensing his or her competitors.

I see the patent system  as contract between inventors and society, with each side giving something in exchange for getting a benefit. Mr. Long’s basic argument is that the scales have tipped too far toward the inventor - having monopoly control for 17 years or so is just too long in this fast moving world. The expected benefit to society - that the inventor has taught us all about his invention and stimulates other inventors - doesn’t happen fast enough. And surely his idea would solve that problem.

But as with any idea, there is a down side. One problem is what happens to the small company. A large medical device company, for example, has all the marketing, manufacturing and engineering resources to crush the small company in the marketplace so the suggestion of mandatory patent licensing turns the small company into a (poorly paid, involuntary) R&D department for the large company. Generally the small company will not be able to survive (or if they can survive they probably can’t grow) on the(intentionally low) license fees alone, so they’re toast.

Also, contrary to Mr. Long’s claim that investors would flock to the inventors, I have yet to meet a VC who would invest in a (small and/or startup) company that cannot use IP to protect its market or at least garner >large< license fees for letting others exploit the market.