The Political Economy of the Patent System

In recent years, many reform proposals have been presented in Congress for changing the patent system in the United States. Most of these proposals have been normative in nature and based on overcoming the many perceived shortcomings of the United States Patent and Trademark Office’s (“Patent Office”) performance. Nonetheless, actual legislative reforms have failed to materialize.

In this Article, we claim that in order to understand the chances of success of any reform to the patent system, we should take a closer look at the patent system’s political economy. In particular, we should be aware of the different pressure groups with a stake in the system and their ability to influence congressional committees through which reform legislation is enacted.

We study the different constituencies favoring or opposing the reform and the strength of their bargaining power based on publicly available empirical data on political contributions by different groups and analyze the impact of political contributions to individual congressional representatives on individual floor votes on the Patent Reform Bill of 2007. In addition, we also take into account the effect of the patent system on different technology industries and economic sectors. As we show, each proposal will generate winners and losers who will try to push reforms forward or prevent them from being enacted. In order to succeed, any reform will need a minimum consensus among these stakeholder groups: firms in different technology sectors, inventors, the patent bar (divided separately into patent prosecutors and litigators), the Patent Office, and the courts.

Given the political processes, the final result of any reform will depart from any theoretical blueprint. As a consequence, a deeper understanding of this political process allows us to better understand the dynamics of reforms and the resultant characteristics of the patent system. In the end, as in any other institutional device, the characteristics and performance of the patent system, plus its sustainability or reforms over time, depend on the preferences of the polity, specifically on the preferences of the groups with a definite stake in the performance of the system. We also determine that the effects of the patent system on different technology and economic sectors will ultimately shape the different constituencies favoring or opposing the reform. We observe that support for any patent reform will depend on the specific factors that define the structure of each economic sector. Furthermore, in each sector, firms have different preferences depending on their economic power and particular stakes in the patent system.