We live in arguably the most innovative and prosperous era in human history. My lifetime alone has seen numerous technological leaps that past generations could never have dreamed of, including the moon landing, the birth of the internet and now the rise of artificial intelligence.
But this pace of transformation is historically the exception, not the rule — and it may not continue much longer if the infringer lobby gets its way.
That’s the lesson to be drawn from this year’s Nobel Prize in economics, which was awarded to Joel Mokyr, Philippe Aghion and Peter Howitt for explaining how innovation drives growth. Aghion and Howitt’s research, in particular, shows that the process of “creative destruction” we often take for granted — new, better technologies continually replacing old ones — rests on incentives such as patent rights, which push the best technologies to the top of the market by enabling innovative upstarts to compete with larger incumbents.
Their findings are a timely reminder because today, powerful corporate interests are pushing sweeping legislative proposals that would erode America’s patent system. Since Congress wants innovation to flourish and future generations to prosper, it must not let these efforts succeed.
Patent rights have underpinned America’s innovation-driven prosperity since our country’s founders enshrined them in the Constitution. By granting inventors a temporary, exclusive right to their inventions, patents give investors opportunities to earn returns on risky research and allow small companies to outcompete established firms on the merits of their products.
As Aghion and Howitt demonstrated, this cycle of research, risk-taking and reinvestment has fostered dramatic economic growth. Scientific advances in recent times have produced dramatic improvements in medicine, communication and other technologies, as well as historically high standards of living.
Small-business innovation, in particular, has been fundamental to America’s economic success. Small businesses file more patents per employee than larger ones and are disproportionately responsible for influential inventions. They also provide over 60 million jobs nationwide and almost 45% of GDP.
Today, however, Big Tech and other corporate interests are trying to weaken America’s patent system to stifle their smaller competitors. And many activists and policymakers are all too happy to help them.
For years, some giant corporations have used a tactic known as “efficient infringement” to sidestep patent rights. Rather than license a competitor’s patented technology, they simply copy it, then drag out expensive lawsuits hoping the smaller firm runs out of money. They coldly calculate that this tactic costs less than taking a license.
To level the playing field, small inventors are increasingly forced to rely on outside help. Third-party litigation funding agreements — which enable outside investors to finance a lawsuit in exchange for a portion of any damages awarded — allow inventors to have a chance against deep-pocketed infringers in the courtroom.
Unsurprisingly, mammoth corporations are now seeking to suppress third-party funding through multiple bills in Congress. One is the so-called Tackling Predatory Litigation Funding Act, which would impose a massive tax on proceeds from litigation funding — essentially reducing incentives for investors to support even the strongest lawsuits.
Another proposal, the Litigation Transparency Act, would require complete disclosure of all litigation funding agreements, exposing the extent of small inventors’ resources and often their legal strategies and handing big companies a litigation advantage.
By undermining a crucial financial lifeline for small companies, these bills would effectively allow large infringers to ignore patents with impunity. Congress would be wise to reject them. Instead, it should pursue reforms that deter patent infringement in the first place and incentivize early settlements, such as the RESTORE Patent Rights Act.
The RESTORE Patent Rights Act would ensure that inventors can usually obtain injunctions — court orders preventing a proven infringer from continuing to use another’s technology — rather than just monetary damages. Injunctions were for centuries the primary remedy for patent infringement, until they were heavily restricted after the 2006 Supreme Court ruling in eBay v. MercExchange.
Restoring injunctions now would reduce incentives for patent infringement, level the legal playing field for small innovators, and shore up the incentives that drive investment in new technologies.
This year’s Nobel Prize in economics underscores a simple truth: America’s economy has flourished because our legal system has historically rewarded innovation. Attempts to subvert enforcement of patent rights would undermine vital incentives, putting our future prosperity at risk.