Patent nonuse and technology suppression: the use of compulsory licensing to promote progress.

Author:Tyler, Neil S.
 
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The U.S. Supreme Court has consistently and adamantly held that patents do not require patentees to use or commercialize their inventions. Rather, patents simply grant inventors the right to exclude others from using or producing their inventions. That exclusive right, once granted, cannot be taken away because of a right holder's failure to work the patent. Great societal harm results, however, when patentees fail to commercialize their patents or deliberately and strategically suppress technologies purely for financial gain.

This Comment argues that utilizing compulsory licensing to combat patent nonuse and technology suppression can help to better achieve the primary goal of the Intellectual Property Clause of the U.S. Constitution. Compulsory licensing that compensates inventors through reasonable and marketplace-based royalty rates will ensure that inventors continue to develop and disclose their research and discoveries to the public. Furthermore, by weakening intellectual property rights on a limited scale, Congress can ensure that patents are made available to the highest-value users who can best use these patents to achieve efficient societal innovation and progress. This Comment therefore questions why patentees are not required to at least make good faith efforts to practice their patents.

INTRODUCTION I. THE U.S. PATENT SYSTEM II. HOW PATENTS CAN THWART SOCIETAL PROGRESS A. Patent Nonuse and Technology Suppression B. Consequences and Solutions III. COMPULSORY LICENSING FOR PATENTS IN THE INTERNATIONAL ARENA A. Trade-Related Aspects of Intellectual Property Rights (TRIPS) B. International Use and Acceptance of Compulsory Licensing C. The United States' Reaction IV. U.S. OPPOSITION TO COMPULSORY LICENSING A. The Development of U.S. Patent Jurisprudence B. Signs of Hope V. COMPULSORY LICENSING TO ENSURE SOCIETAL PROGRESS A. The Benefits of Compulsory Licensing B. Proposed Framework CONCLUSION INTRODUCTION

On March 19, 1787, the State of New York granted John Fitch one of the most famous state patents ever issued. (1) For a fourteen-year term, the government granted Fitch a legal monopoly and the right to be the sole and exclusive maker and user of steamboats in New York. (2) After only one year, however, the legislature repealed the grant because Fitch failed to adequately work the patent. (3)

Instead of allowing the invention and its technology to enter the public domain, the legislature subsequently awarded Robert R. Livingston the exclusive right to the steamboat "for the next 20 years." (4) But over the next five years, Livingston also failed to produce results that satisfactorily benefited society. (5) Thereafter, in 1803, when Robert Fulton produced the Clermont, (6) a steamboat that encompassed the technology claimed in Livingston's patent, New York not only extended the patent for another twenty years, but also granted both Fulton and Livingston the right to produce steamboats and exclude others from using the invention. (7)

At first blush, the steamboat might seem completely irrelevant to modern-day patent jurisprudence. Under the Patent Act of 1790, individual states can no longer grant exclusive patent rights to inventors. (8) Today, the U.S. Patent and Trademark Office (PTO) is the only agency in the United States permitted to grant these limited-in-time, government-approved monopolies. (9) Furthermore, only under very limited circumstances (10) can patent terms be extended past the internationally standardized term of twenty years. (11) However, the New York steamboat patent and the state legislature's transfer of patent rights to Livingston and Fulton, high-value users who were more capable than Fitch of producing steamboats for the benefit of society, serve as an example of the government's embrace of the original purpose of intellectual property rights: to motivate individuals to invent through short-term economic incentives in order to ensure extensive technological and societal advancement. (12)

The Supreme Court has adamantly held that patents do not require that patentees use or commercialize their inventions. (13) Patents simply grant inventors the right to exclude others from using or producing their inventions. (14) That exclusive right, once granted, cannot be taken away because of a right holder's failure to work the patent. (15) From an economic and public interest standpoint, however, would society not benefit from requiring patentees to at least make good faith efforts to make use of, distribute, or commercialize their patents? If the government grants an inventor a monopoly, which harms the marketplace and consumer welfare, (16) what is wrong with requiring recipients of this exclusive right to actively promote the progress of the sciences and useful arts for the benefit of society?

No one would argue that the federal government should take the steps the New York state legislature took when it revoked John Fitch's patent after only one year of efforts. The government should not strip a patentee of his property rights and then arbitrarily reissue the patent to a different individual. Neither should the invention fall into the public domain if nonworking of the patent is proven. Rather, the United States should embrace the ideals and goals of patent law the New York legislature typified when it transferred the steamboat patent to a higher-value user--even if the methods it used in that redistribution of rights were ill-advised.

As established in the Intellectual Property Clause of the U.S. Constitution, the primary goal of patent law is to advance the public interest and achieve societal progress as efficiently as possible. (17) Similarly, international trade agreements and the vast majority of foreign nations have recognized the great societal harms associated with nonworking of patents and suppression of technology. (18) Mechanisms such as compulsory licensing, whereby "the state requires a patent holder to license his patent to another," (19) could combat patent nonuse and technology suppression and help achieve the goals outlined in the U.S. Constitution. A limited use of compulsory licensing that compensates inventors through reasonable and marketplace-based royalty rates will continue to incentivize inventors to develop and disclose their research and discoveries to the public. (20) Meanwhile, compulsory licensing will help ensure that the highest-value users--like Livingston and Fulton--rather than just the inventors themselves, will once again be permitted to use and commercialize new and progressive technologies to benefit society.

Part I of this Comment describes the constitutional foundation of the U.S. patent system and its purpose in granting monopolies to inventors in exchange for disclosure of their inventions. Part II then discusses the perverse incentives that patents may provide to inventors. It focuses on the societal problems that often arise when companies suppress technologies and the reasons why it might be advantageous for an inventor to decide not to work her patent. Part III examines international patent laws and the use of compulsory licensing throughout the world. Part IV discusses the history of Supreme Court patent jurisprudence and analyzes the reasons why compulsory licensing of patents has not been implemented in the United States. Finally, Part V argues for a limited use of compulsory licensing in the United States to exclusively address nonworking of patents and strategic suppression of inventions. A detailed structure is proposed that would ensure the original constitutional purpose of patents is better achieved.

  1. THE U.S. PATENT SYSTEM

    The Intellectual Property Clause of the U.S. Constitution grants Congress the power to "promote the Progress of Science and useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries." (21) For centuries, exclusive patent rights have been granted to inventors for the benefit of the public. But intellectual property rights have continued to evolve and rise in importance as the world has shifted toward an increasingly knowledge-based economy.

    The grant of a patent comes with no affirmative duty on the part of the patent holder to use or commercialize the technology described in the patent's claims. (22) Instead, the patentee, after disclosing her invention, has the right to exclude others from using or commercializing the technology. (23) But patent rights and government-granted monopolies are a means to an end: patents are designed to spur research, development, and inventiveness for the benefit of society. (24) The ability to extract monopoly prices is an acceptable evil intended to advance technological development. (25) The system is thus in constant tension: patents do not force rights holders to take any affirmative steps to work their patents, but permitting patentees to choose not to work their government-granted monopolies thwarts the Constitution's stated goal of "promot[ing] the Progress of Science and useful Arts." (26)

  2. HOW PATENTS CAN THWART SOCIETAL PROGRESS

    In recent years, the international intellectual property community has discussed at length patent law's perceived shortcomings in relation to the pharmaceutical industry. Developed and developing nations have fought bitterly over the consequences of granting entities monopoly rights for lifesaving drugs and necessary medicines. (27) Communities devastated by AIDS and other debilitating diseases have argued passionately that it is abhorrent on a moralistic level for pharmaceutical companies to value profit over thousands, or even millions, of lives. (28)

    Whether compulsory licensing should be used to combat the exorbitant prices pharmaceutical companies often charge during a drug's patent term is outside the scope of this Comment. (29) Rather, this Comment's main focus is situations in which a patentee fails to work her patent or consciously suppresses potentially beneficial technologies to the public's...

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