George Mason University Antonin Scalia Law School

Empirical Study Confirms Positive Relationship Among Patents, Technological Progress, and Societal Benefit

dictionary entry for the word "innovate"We “stand on the shoulder of giants,” goes the famous adage. In a groundbreaking new law review article, Does Patented Information Promote the Progress of Technology?, Cardozo Law’s Jonathan H. Ashtor examines the relationship among patents, information theory, and their corresponding benefits to society and technology. His study applies economic theory to empirical patent data, concluding that a patent’s disclosure, and hence its informational content, has a positive technological impact on society beyond any limited private monopoly bestowed on the inventor. The paper was supported with a research grant from CPIP’s Leonardo da Vinci Fellowship Research Program.

Today’s populist, conventional wisdom is that patents are monopolies that block public benefits and restrict innovative behavior. Ashtor’s research reveals the opposite. He explains that “this study finds that the greater the information content of a patent’s disclosure, the higher the probability it will be held valid, and in turn, the larger its expected positive impact on the development of future technologies.” Combining an in-depth review of the underlying economic theories around the role of the patent system’s information dissemination function with a rigorous empirical study methodology, Ashtor confirms that valid patents have a greater positive impact on future technologies.

Economic Theory Validates Patent System’s Ultimate Societal Benefits

Academics often cite a variety of theories underlying the fundamental benefits of the patent system. But, at its core, the patent system is a quid pro quo between the private benefit of the grant of a limited monopoly in exchange for the public dissemination of the knowledge of a discovery, in turn, allowing others to build upon this information. While the U.S. Constitution enshrines this concept for promoting the “useful Arts,” (Art. 1, sec. 8, cl. 8), the theory around this bargain dates back thousands of years.

Modern economic patent theories are rooted in classics such as Aristotle’s Politics, in which the ancient Greeks advocated for recognition, awards, and honors for the achievements of discoverers. The “storehouse of knowledge” theory states that patent activity contributes to expanding public storehouse of knowledge. Relatedly, the “prospect theory” advances an understanding that the opportunity to obtain a patent monopoly creates the incentive for investment in research for new inventions. Finally, the “innovation theory” infers that patents are necessary to induce people to put existing inventions to practical use. Together, these theories speak to how patents on discoveries ultimately contribute to the public’s benefit.

Moving beyond these traditional concepts, Ashtor’s paper explores the economic “tradeoff theory” of patents. First appearing in Nobel Laureate William Nordhaus’ famous 1969 article regarding the technological development process, tradeoff theory states that when the patent disclosure function works properly, patents tend to promote technological progress notwithstanding the exclusive monopoly rights. Ashtor explains that tradeoff theory supports the idea that more robust patents have the greatest positive impact on technological development. He observes that “[p]atent law provides a convenient lens through which to observe the impact of a patent on future technology.” Conversely, invalid patents, such as those lacking novelty, are found to have the weakest impact on future technologies. (Ashtor notes that even an invalidated patent is useful; it is prior art and can also guide future technological development.) While this causal relationship may be intuitive for some, Ashtor uses empirical evidence to back it up.

Empirical Analysis Verifies Positive Impact of Patents

Employing a solid empirical research methodology, the study examines patents and data obtained from federal court patent litigation records, along with input from the USPTO’s Office of Economic Analysis. In essence, the study charts the impact of future patented technological progress as a product of the resulting new patents filed (noted through the use of forward citations). Forward citations are widely used as a measure of innovation, particularly when comparing patented technology in a broad range of fields. Ashtor’s study relies on a dataset of approximately 1,000 U.S. patents. A multitude of variables are considered in determining whether the patents are demonstrating this positive effect, including the number patent claims, the length of the respective patent claims, the size of the patent family, the number of inventors, the written description’s length, the vintage of the patents, and the adjudicated validity or invalidity.

The study incorporates data modeling and log-linear regression analysis. It then measures future technological innovation through indicia such as future additional patents or other cumulative innovation. For example, by counting the number of additional citations each patent generates, one can assess the impact, including the follow-on technological advancement regardless whether they are subsequently validated or invalidated patents. Ashtor’s models are designed to consider, and overcome, various systemic challenges, such as biases in the dataset or other idiosyncrasies.

Information Theory Supports the Value of Patents

At the heart of Ashtor’s paper is a discussion about how the information contained in a patent disclosure has real value not only for the inventor, but also for the public at large. The debate around intellectual property often conjures fear that it “locks up” public knowledge or somehow “holds up” progress. But Professor Nordhaus’ tradeoff theory demonstrates that “patents do not provide permanent or very powerful exclusive rights over information.” In fact, the very dissemination of information arising from the patent system leads to real public benefits. It’s critical to understand that a patent protects the disclosed inventions, not the underlying ideas. Ashtor demonstrates that the patent system is critical to the dissemination of knowledge.

Ashtor’s study validates the tradeoff theory of patents. Namely, the tradeoff arising from the societal benefit of a valid patent’s information disclosure is generally greater than the restrictions from the private right of exclusivity due to any patent monopoly. Hence, valid patents promote more technological progress than invalid patents. The way in which patents are invalidated corresponds to varying impacts on technology, and Ashtor’s empirical data demonstrates a direct relationship between a patent’s technological impact and certain intrinsic characteristics of its disclosure. Generally, valid patents tend to have greater information content than invalid ones.

Human Genome Project Provides Perspective

The importance of Ashtor’s research is highlighted through the additional context of a case study. He considers how patent activity impacts cutting-edge fields like health care and molecular biology. While prior studies have looked at gene patenting activity surrounding the Human Genome Project (HGP), they’ve largely been limited to examinations of follow-on activity arising from both the publicly available patented information and the gene patenting activity by private firms. Ashtor is quick to note that past studies around the Human Genome Project do not “directly address cumulative innovation of patented technologies,” the focus of his exploration. Ashtor argues that all of the gene-related patents flowing from the HGP illustrate the positive impact of future patented technological progress. He concludes that his case study hence shows that the resulting gene patenting activity from the HGP supports the tradeoff theory of patents.

Ashtor’s study is groundbreaking, empirically rigorous, and provides much for future researchers to consider. As skeptics of intellectual property continue to voice their doubts, it’s critical to understand the societal benefits that patents confer. Ashtor’s work takes a step in the right direction, and we can expect other researchers will stand on his shoulders as they build upon his work.

Ashtor’s article was recently published in the Northwestern University Law Review, and the full text can be downloaded here: