Patent Assertions: Are We Any Closer to Aligning Reward to Contribution?
The 2011 America Invents Act was the most significant reform to the United States patent system in over fifty years. However, the AIA did not address a number of major problems associated with patent litigation in the United States. In this paper, we provide an economic analysis of post-AIA developments relating to Patent Assertion Entities (PAEs) and Standard-Essential Patents (SEPs). For PAEs and SEPs, we examine the alignment, or lack of alignment, between the rewards provided to patent holders and their social contributions. Our report is mixed. Regarding PAEs, we see significantly improved alignment between rewards and contributions, largely due to a series of rulings by the Supreme Court. Legislation currently under consideration in Congress would further limit certain litigation tactics used by PAEs that generate rewards unrelated to contribution. We also see some notable developments relating to SEPs, especially with the recent reform to the patent policies of the IEEE, a leading Standard-Setting Organization (SSO) and with several recent court decisions clarifying what constitutes a Fair, Reasonable and Non-Discriminatory (FRAND) royalty rate. However, other steps that could better align rewards with contributions on the SEP front have largely stalled out, particularly because other major SSOs do not seem poised to follow the lead of the IEEE. Antitrust enforcement in this area could further improve the alignment of rewards and contributions.
Prepared for the National Bureau of Economic Research, Innovation Policy and the Economy Conference, 14 April 2015, organized by Joshua Lerner and Scott Stern. We thank the organizers for their comments on an earlier draft. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Fiona Scott Morton
Fiona Scott Morton engages in consulting on issues related to patents and antitrust, including the assertion of patents, patent remedies, and standard-essential patents. The research reported in this paper is independent academic work and has not been funded by any entity apart from Yale University.Carl Shapiro
Carl Shapiro engages in consulting on issues related to patents and antitrust, including the assertion of patents, patent remedies, and standard-essential patents. The research reported in this paper is independent academic work and has not been funded by any entity apart from the University of California at Berkeley.