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FTC Urges Changes to U.S. Patent Policy

BY John R. Ingrassia
November 01, 2003

In October, the FTC issued a report titled “To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy.” Citing an existing system that relies on presumptions in favor of the issuance and validity of patents and that makes challenges to the validity of existing patents difficult and costly, the report contains specific recommendations on what the FTC considered to be improvements to the U.S. patent system. The report comes nearly 1 year after the FTC and the DOJ completed a series of public hearings on the proper balance between patent and antitrust law with an aim to foster innovation and maximize consumer welfare. The hearings, which took place over 24 days between February and November of 2002, attracted the participation of more than 300 panelists and more than 100 written submissions from business representatives, the independent inventor community, and leading patent and antitrust practitioners, scholars and organizations.

Avoiding Patent 'Arms Race'

While praising patent law policy for achieving a proper balance with competition policy for the most part, the report expresses concerns that the patent system is out of balance with competition policy in some ways. One important concern voiced by hearing participants is the issuance of questionable patents that are likely invalid or overly broad. The report identifies a number of situations in which such patents can be harmful to competition, including increasing the cost of innovation or discouraging innovation altogether in some areas. Certain firms reported refraining from entering a business or continuing with research covered by what they identified as questionable patents. The issuance of questionable patents also appears to lead to costly patent “arms races,” encouraging companies to amass increasingly large portfolios of sometimes questionable patents to better their bargaining power when facing questionable patents held by others.

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