The Evolving IP Marketplace – Aligning Patent Notice and Remedies With Competition

Federal Trade Commission Report

10/16/2012
(Original Publish Date: 3/1/2011)

Innovation benefits consumers through the development of new products, processes and services that improve lives and address unmet needs. It is key to meeting society's greatest challenges in areas as diverse as energy production, communications and health care, and it is essential to sustained economic growth and global competitiveness. But innovation is a complex process. It involves a series of steps from idea to invention through development to commercialization, each of which can be expensive, risky and unpredictable. The goal of the patent system is to promote innovation in the face of that expense and risk. It does so by giving patent owners the right to exclude others from making, using or selling a patented invention for 20 years. By preventing copying that might otherwise drive down prices, the patent system allows innovators to recoup their investment in research and development (R&D). The patent system plays a critical role in promoting innovation across industries from biotechnology to nanotechnology, and by entities from large corporations to independent inventors. The patent system's exclusive right promotes innovation, but so too does competition, which drives firms to produce new products and services in the hope of obtaining an advantage in the market. The patent system and the antitrust laws share the fundamental goals of enhancing consumer welfare and promoting innovation. The legal doctrines that most successfully accomplish those goals align the patent system and competition policy so that one does not undermine the effectiveness of the other. One important aspect of that alignment is antitrust enforcement that recognizes the incentives to innovate created by the patent system. Condemning efficient, legitimate uses of patent rights can undermine those incentives and harm consumers. For that reason, the guidance of the 2007 FTC/DOJ Report on IP and Antitrust focused on incorporating careful consideration of the benefits of patent rights into antitrust analysis. Another aspect of that alignment is a proper balance between exclusivity and competition. Invalid or overbroad patents disrupt that balance by discouraging follow-on innovation, preventing competition, and raising prices through unnecessary licensing and litigation. For that reason, many of the recommendations in the 2003 FTC IP Report focused on improving patent quality as a means of balancing exclusivity and competition.