The Competitive Advantage of Weak Patents

IntroductionCurrent U.S. patent law is based on a fundamental misconception regarding the effects of U.S. patents on U.S. competitiveness. The conventional view is that U.S. patents help firms in the United States to compete against foreign rivals because U.S. patents provide U.S. inventors with exclusive rights that promote the discovery of socially beneficial inventions. Nevertheless, conventionalists recognize that exclusive patent rights also inhibit competition regarding new inventions, and that competition provides many benefits for society. As a result, U.S. policymakers typically have tried to balance the incentive effect of U.S. patents against the competitive costs.1 When considering U.S. competitiveness in global markets, however, conventionalists have failed to understand the impact of territoriality on U.S. patent law and U.S. competitiveness. This Article strives to correct these errors.Certainly, U.S. patent law is closely related to competition in global markets. By providing inventors with exclusive rights to their discoveries, U.S. patents encourage innovation,2 and companies in the United States frequently outcompete their international rivals by developing better products or cheaper manufacturing processes.3 Focusing on the incentive effect of U.S. patents, U.S. lawmakers have long argued that strong U.S. patents increase U.S. competitiveness.4 Many commentators agree, asserting for instance that "[o]ne of the historical strengths of the U.S. science, engineering and technology enterprise has been the vigorous protection of [intellectual property] rights."5 Indeed, some lawmakers apparently believe that U.S. patents predominately issue to U.S. inventors and that improvements to the U.S. patent system will therefore inure to the benefit of U.S. innovators, not foreign firms.6 Bolstered by these arguments, patent rights have grown more robust in the United States than in almost any other country.7Nevertheless, the incentive effect of U.S. patent law often provides U.S. innovators with little advantage over foreign rivals because inventors worldwide can obtain U.S. patents.8 Indeed, because only U.S. ents can asserted in the United States and because the U.S. economy is the largest market in the world, foreign inventors are obtaining U.S. patents in record numbers.9 In recent years, the U.S. Patent and Trademark Office ("U.S. Patent Office") has issued more U.S. patents to foreign inventors than to U.S. inventors.10In contrast to the similar incentive effects of U.S. patents on U.S. and foreign firms, the harms to competition stemming from U.S. patents fall disproportionately on firms in the United States. U.S. patents have little effect on competition in foreign markets due to limits on the extraterritorial effect of U.S. law.11 Some traditional patent policymakers have recognized that U.S. patents therefore can limit the logical tools to firms within the United States while leaving foreign rivals relatively unconstrained. As a result, U.S. lawmakers have sought to convince other countries to strengthen their patent laws to match U.S. patent law.12 Although many countries have refused, the United States has nevertheless maintained high levels of patent tion, because the benefits still outweigh the costs.13 U.S. patent policymakers have also ignored an additional cost inherent to U.S. patent protection: U.S. patents weaken rivalry among competitors in the United States-and domestic rivalry substantially impacts competitive advantage.14 For example, intense domestic rivalry drives firms to improve and to reduce internal inefficiencies.15 Domestic rivalry also courages the of advanced factors of production, like technological information, and helps to spawn important supporting industries, like suppliers and manufacturers of related products.16Having failed to consider all of the costs of strong patent protection, U.S. lawmakers have embraced patent laws that actually undermine U. …