Medical Device and Diagnostic Industry (MD+MI): Empirical Evidence Belies Survey Findings on Patent Licensing, by Ron D. Katznelson
This post originally appeared in Medical Device and Diagnostic Industry (MD+MI) on September 11, 2015.
An MD+DI blog post by Arundhati Parmar this past March, titled “You Think Patents = Innovation? Wrong,” accepts at face value the assertions made by law professors Robin Felman and Mark Lemley in their article “Does Patent Licensing Mean Innovation?” The blog post highlights these authors’ “rather explosive argument that patent licensing … does not really lead to innovation.” However, the problem with the article by these authors, as with other articles purported to establish that patent enforcement stifles innovation, is that it is based on a flawed, biased, and selective survey of parties mostly interested in producing the particular end-result of the survey.
In attempting to investigate how technological developments were influenced by the licensed patented technologies, the Feldman & Lemley study “surveyed” 188 entities and set a straw man of the role of “patent intermediaries;” asked incomplete questions of an incomplete set of parties and entities; and ignored the most relevant empirical data sources, information on the specific patented technologies associated with the patents asserted or licensed. For example, soliciting responses from attorneys, contract managers, and in particular self-identified membership in advocacy groups such as the Internet Association, the Computer and Communications Industry Association, or the Coalition for Patent Fairness is one of the methods for constructing the sample. (Note: The authors do not disclose the support for their research or whether any of these organizations sponsored this “survey.”) This hardly reaches the entities and the technologists and engineers that actually adopted the associated patented technologies that were licensed. But a more fundamental flaw is apparently involved here: The survey sample included only entities that had licensed patents ex post (i.e., after a patent was asserted against them), but not those who voluntarily took licenses or participated in development under ex ante licenses (i.e., licenses that were entered into without a patentee resorting to patent assertion or litigation).
Exclusive patent rights foster the coordination of patented technology diffusion in a way that protects investments in its development. Unlicensed infringement not only returns nothing to the investors in the patented technology, but it deprives them of market share and associated returns relied upon for making their investment. Without the ability to enforce patent rights (including through intermediaries), voluntary licensing and coordination would not take place. Without the enforceable exclusive patent right, fewer investments would be made at the early and risky stages of inventive technologies. Apparently, ignoring these facts created Feldman & Lemley’s flawed straw man.