The Federal Trade Commission today issued its report on how to promote innovation by finding the proper balance of competition and patent law and policy. Although both competition in markets and patents for inventors can work together to foster innovation, the report states that each policy requires a proper balance with the other to do so. “Consumers and innovators win when patents and competition policy are aligned in the proper balance. Although questionable patents can harm competition and innovation, valid patents work well with competition to promote innovation. This Report analyzes and makes recommendations for the patent system to maintain the proper balance with competition,” said Timothy J. Muris, FTC Chairman.
Today’s report – which makes recommendations for the patent system – is the first of two reports about how to maintain that balance. A forthcoming second report by the FTC and the Antitrust Division of the Department of Justice (DOJ) will make similar recommendations for antitrust law.
Among the ten recommendations of today’s report, the FTC proposes legislative and regulatory changes to improve patent quality. Patents of questionable validity can slow further innovation and raise costs to consumers. Specifically, the report recommends:
The report also recommends that Congress limit the award of treble damages for willful patent infringement. Some hearings participants explained that they do not read their competitors’ patents because of concern that learning about others’ innovations will expose them to treble damages infringement liability. Failure to read competitors’ patents, however, can harm innovation and competition. The FTC’s recommended legislative change would allow firms to
read patents to learn about new innovations and to survey the patent landscape to assess potential infringement issues, yet would retain a viable willfulness doctrine that protects both wronged patentees and competition.
The FTC also outlines in the report several steps it will take to increase communication between the antitrust enforcement agencies such as the FTC and the PTO. In particular, the FTC will:
Today’s report stems from hearings that the FTC and the DOJ convened in February 2002. The hearings took place over 24 days and involved more than 300 panelists. The antitrust agencies heard perspectives from business representatives from large and small firms, the independent inventor community, leading patent and antitrust organizations and practitioners, and scholars in economics and patent and antitrust law. Business representatives were mostly from high-tech industries: pharmaceuticals, biotechnology, computer hardware and software, and the Internet. In addition, the FTC received about 100 written submissions.