Will Patent Reform Create Jobs?

August 30th, 2011 by Lee Eldridge

In recent weeks the President has been outlining a number of proposals that he says can be enacted now that will stimulate the economy. Patent reform has been among these proposals, and figures to be a key component of the President’s upcoming jobs plan.

The U.S. Patent and Trademark office has a backlog of 700,000 applications. In 1990 it took approximately 18 months to process an application. Today it takes nearly three years to process an application. Clearly the system needs to be fixed. But will fixing the system really create jobs? Some experts think so. From IBD:

Sen. Patrick Leahy, co-sponsor of a reform bill, says it will create 200,000 jobs. Obama’s patent office head, David Kappos, told lawmakers “millions of jobs are lying in wait” for “a job creation engine (to be) turned loose.”

But no one knows for sure how many new jobs, if any, the reforms passed by the Senate and the House this year will create.

Leahy’s office could not give a source for the 200,000 number. And a White House backgrounder on patent reform only said it is “key to winning the future.”

Business economist Everett Ehrlich, in a 2009 analysis, found the reform could create 100,000 jobs over five years. Economists say the U.S. needs about 100,000 new jobs a month just to keep up with labor force growth.

A New York Times Op-Ed last year said cutting the patent office backlog could yield “at least 675,000 and as many as 2.25 million jobs,” but called this a guess.

“It’s hard to calculate the job effects of this reform,” said Philip Johnson, Johnson & Johnson’s chief intellectual property counsel and a reform backer. “Jobs related to patents are pervasive and there are a lot of ripple effects.”

But not everybody likes the proposed reforms:

But more patents don’t always mean more jobs. In the last three years, the U.S. has granted more than 620,000 patents, almost as many as in the booming 1980s.

“Will it help small businesses that create the most jobs? I think we would question that,” said Molly Brogan of the National Small Business Association.

Currently, the first person or firm to invent something is the rightful patent owner, even if someone else files for protection first. Under the reforms, the first person to file wins the patent.

Advocates say the reforms will remove uncertainties that undermine R&D efforts. The reforms also aim to cut the patent office backlog by protecting patent fees from congressional raids.

Critics say the “first to file” switch risks skewing patent awards toward large companies that tend not to be big job creators. They point to a 2009 study by the National Bureau of Economic Research, which found Canada’s 1989 switch to “first to file” shifted “the ownership structure of patented inventions towards large corporations.”

Kappos says these concerns are unfounded. Of 3 million applications over seven years, he said, “Only one independent inventor’s filing would have received a different outcome under the first-inventor-to-file system.”

The Irony of Reform
While I certainly support the concept of speeding up and streamlining the patent process, I suspect these job projections are exaggerated. Patents are getting processed, and it’s hard to imagine that processing them faster will create millions of jobs that would not have existed otherwise. What I find ironic in this conversation is that many have complained that burdensome and unnecessary government regulations are one of the many things holding back our economy. And in this case, the administration appears to agree that streamlining the regulatory process would be a boon to the economy. It’s too bad they’re not willing to apply this approach across all government rules and regulations.

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