AN EMPIRICAL LOOK AT SOFTWARE PATENTS
U.S. legal changes have made it easier to obtain patents on inventions that use software. Software patents have grown rapidly and now comprise 15 percent of all patents. They are acquired primarily by large manufacturing firms in industries known for strategic patenting; only 5 percent belong to software publishers. The very large increase in software patent propensity over time is not adequately explained by changes in R&D investments, employment of computer programmers, or productivity growth. The residual increase in patent propensity is consistent with a sizeable rise in the cost effectiveness of software patents during the 1990s. We find evidence that software patents substitute for R&D at the firm level; they are associated with lower R&D intensity. This result occurs primarily in industries known for strategic patenting and is difficult to reconcile with the traditional incentive theory of patents.
The Private and Social Costs of Patent Trolls
In the past, non-practicing entities (NPEs) — firms that license patents without producing goods — have facilitated technology markets and increased rents for small inventors. Is this also true for today’s NPEs? Or are they “patent trolls” who opportunistically litigate over software patents with unpredictable boundaries? Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives and a net loss of social welfare.
Do Patents Perform Like Property?
Do patents provide critical incentives to encourage investment in innovation? Or, instead, do patents impose legal risks and burdens on innovators that discourage innovation, as some critics now claim? This paper reviews empirical economic evidence on how well patents perform as a property system.
Rational Ignorance at the Patent Office
It is common to assert that the Patent and Trademark Office does a bad job of examining patents, and that it should spend more time and money weeding out bad patents. In this article, Professor Lemley challenges that conventional wisdom. Using available data regarding the cost and incidence of patent prosecution, litigation, licensing and other uses of patents, he demonstrates that strengthening the examination process is not cost effective. The core insight is that very few patents are actually litigated or licensed; most simply sit on a shelf unused, or are used only for noncontroversial purposes like financing. Because of this, society would be better off spending its resources in a more searching judicial inquiry into validity in those few cases in which it matters than paying for a more protracted examination of all patents ex ante. In economic terms, the patent office is “rationally ignorant” of the objective validity of the patents it issues.
Access to Affordable HIV/AIDS Drugs: The Human Rights Obligations of Multinational Pharmaceutical Corporations
The United Nations has characterized the impact of the HIV/AIDS crisis in Africa as “no less destructive than that of warfare itself.”1 In developed nations, the widespread availability of life-prolonging HIV/AIDS drugs has turned AIDS from a death sentence into a manageable and treatable illness.2 But in developing countries, which account for ninety percent of infected people globally, the overwhelming majority of HIV/AIDS sufferers cannot afford these life-saving treatments.3 In South Africa, where the average daily income is $7, a one-year supply of the most common HIV treatment combination from the major drug companies costs a staggering $1200. 4 The generic equivalent of that same drug combination costs $350 per year.5
Developing countries and human rights activists claim that these prohibitively expensive drug prices are the result of strong patent protection, which governments must provide under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).6 While TRIPS is mostly favorable to the rich industrialized world and its multinational corporations,7 it provides some flexibility for states to address their public health needs by allowing several public interest exceptions to patent protection. s Through the use of controversial practices such as compulsory licensing and parallel importing, drug prices in developing countries feasibly could be reduced by ninety percent.9
Along with other developing nations, South Africa has attempted to take advantage of this flexibility by adopting a law designed to reduce the prices of HIV/AIDS drugs.14 Thus, in 1997, the South African Parliament proposed an amendment to its existing Medicines and Related Substances Control Act (“Medicines Act Amendment”) to allow the government to take measures to ensure wider access to essential drugs.1 The multinational drug companies, in tandem with the U.S. government, however, have aggressively opposed such legislation, characterizing it as an infringement on their intellectual property rights by allowing practices such as parallel importing and compulsory licensing. 2 In South Africa, for example, subsidiaries of the major multinational drug companies filed a lawsuit to prevent implementation of the amended law. 13 While the drug industry and its supporters have defended the intellectual property rights of drug companies, others have framed access to affordable HIV/AIDS drugs as a human rights issue. During the controversy in South Africa, for example, human rights organizations and commentators accused the drug companies of violating human rights. 15
Part II explores the human rights dimension to HIV/AIDS drugs access.21 Section A provides the normative framework for understanding fundamental human rights under international law, and the concomitant obligations to ensure those rights.21 This section then builds on that framework to examine the rights implicated by lack of access to HIV/AIDS treatment.22 Section B analyzes the human rights obligations of corporations under a form of “soft law” corporate duties, the corporate codes of conduct promulgated by multilateral institutions.23
In Part III, this Note argues that access to HIV/AIDS drugs is a human right, and that the drug companies’ actions to prevent developing countries from making HIV/AIDS drugs more affordable violate the “soft law” human rights obligations of multinational corporations under the multilateral corporate codes of conduct.24 Section A builds on the human rights framework established in Part II.A to argue that access to HIV/AIDS drugs is a fundamental human right.25 Section B argues that the multilateral codes of conduct call on drug companies to respect host states’ laws and policies that promote the human right to affordable HIV/AIDS treatment, and to respect states’ obligations under international law to protect, promote, and fulfill the right to affordable HIV/AIDS treatment.26 It further argues that drug corporations violate these “soft law” human rights obligations when they challenge the actions of developing countries to increase access to life-prolonging HIV/AIDS drugs.27