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Loughlan, Patricia --- "Patents: Breaking into the Loop" [1998] SydLawRw 24; (1998) 20 (4) Sydney Law Review 553



[*] Senior Lecturer in Law, The University of Sydney.

[1] Unger, R M, The Critical Legal Studies Movement (1986) at 21.

[2] The controversy flows from the fact that so far neither economic theory nor contemporary empirical economic research can give a clear answer to the question of whether or not a patent system actually provides a net societal benefit. Major economic inquiries into the benefits of patents regimes have been commissioned by several governments over the past few decades and the findings have been both surprisingly consistent and surprisingly agnostic. They have generally confirmed the conclusion of Machlup in the United States in the 1950s: If we did not have a patent system it would be irresponsible on the basis of our present knowledge of its economic consequences to recommend instituting one. But since we have had a patent system for a long time, I would be irresponsible on the basis of our present knowledge to recommend abolishing it. Machlup, F, An Economic Review of the Patent System at 80; see also Taylor, C T, and Silberston, Z A, The Economic Impact of the Patent System: A Study of the British Experience (1973) at 37, “[t]he most we can say from a preliminary consideration of the issues is that there can be no general presumption in theory that a patent system of the sort that we have in the United Kingdom is either advantageous or disadvantageous to the economy as a whole.” See also Firestone, O, Economic Implications of Patents (1971) and Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia (1984) Canberra for reports with similar conclusions.

[3] Bureau of Industry Economics, The Economics of Patents, (1994) Occasional Paper 18, Australian Government Publishing Service, Canberra at 11.

[4] Mandeville, T D, Lamberton, D M, Bishop, E J, Economic Effects of the Australian Patent System (1982) Australian Government Publishing Service, Canberra at 213.

[5] Inlow, M, The Patent Grant (1950) at 133.

[6] See comments such as that of Power, a patents lawyer and biochemist, that, “the patent office is not a clearing-house for public ethics”, in Power, P A, “Interaction Between Biotechnology and the Patent System” (1992) AIPJ 214 at 230 or that of Roberts, “[i]ndustry tends to take the view that morality is too important to be left to patent offices and that it is unwise to have a fine moral filter applied by Patent Examiners.” Roberts, T, “The Former Biotech Patents Directive” (1995) Patents World 27. As to who Roberts is, see below n38.

[7] [1980] USSC 119; (1980) 447 US 303.

[8] Federico, F, “Origin and Early History of Patents” (1929) 11 J of the Patent and Trademark Office Soc 299; Robinson, R, (1890) The Law of Patents 6. It has been suggested that one of the reasons for the American revolution was colonial revulsion at the granting of patents and monopolies. See Graham v John Deere Co [1949] USSC 95; (1965) 383 US 1 at 7.

[9] Ramsey, K, “The Historical Background of Patents” (1936) 18 J of the Patent and Trademark Office Soc 6 at 7.

[10] Above n5 at 22.

[11] D’Ewes, S, Journals of all the Parliaments during the Reign of Queen Elizabeth (both of the House of Lords and House of Commons) (1682) at 652, quoted in Inlow, above n5 at 24.

[12] Above n5, at 25.

[13] As for the “nodal points” for communication circuits, see Lyotard, J F, The Postmodern Condition: A Report on Knowledge, (1984) at 15, “[y]oung or old, man or woman, rich or poor, each person is always located at ‘nodal points’ of specific communication circuits, however tiny these may be. Or better, each is always located at a post through which various kinds of messages pass.”

[14] Above n5 at 20.

[15] Mandeville, above n4 at 126.

[16] Inlow, above n5 at 93.

[17] Mandeville, above n4 at 126–127.

[18] See ss13 and 67 of the Patents Act 1990 (Cth).

[19] Patents Act 1990 (Cth), s65.

[20] Article 1, s8, cl 8 of the Constitution of the United States of America.

[21] Mandich, R, “Venetian Patents (1450–1550)” (1948) 30 J of the Patent and Trademark Office Soc 166 at 177.

[22] Gomme, A, Patents of Invention: Origins and Growth of the Patent System in Britain (1946) at 12.

[23] For an account of the TRIPS Agreement, that part of the GATT Agreement which governs intellectual property rights, see below, p26ff.

[24] Mandeville, above n4 at 121.

[25] This statutory provision is quoted in Oddi, S, “Un-Unified Economic Theories of Patents – The Not-Quite-Holy Grail” (1996) 71 Notre Dame LR 267 at 274, n36 and a further reference is made therein to the provision’s quotation in Machlup, above n2 at 22. If you want to dispute the sentiment of a classically written 18th century statement, however, you can do so armed with the classically written statement of another 18th century figure, namely, Thomas Jefferson. Here is his statement: “stable ownership is the gift of social law and is given late in the progress of society. It would be curious then if an idea, the fugitive fermentation of an individual brain could, of natural right, be claimed in exclusive and stable property.” See Jefferson, T, The Portable Thomas Jefferson, Peterson, M D (ed), (1984) at 529–530.

[26] Taylor and Silberston, above n2 at 25.

[27] Oddi, S, “Beyond Obviousness: Invention Protection in the Twenty-First Century” (1989) 38 The American U LR 1097 at 1137–1138.

[28] Mandeville, above n4 at 213.

[29] Braga, C A P, “The Economics of Intellectual Property Rights and the GATT: A View From the South” (1989) Vanderbilt J of Transn’l Law 243 at 253; Berkowitz, Kotowitz “Patent Policy in an Open Economy” (1982) The Canadian J of Econ 1 at 2.

[30] The TRIPS Agreement will be more fully discussed below, under proposition (5).

[31] Letter from Thomas Jefferson to Isaac McPherson (August 1813), quoted in Graham v John Deere Co [1949] USSC 95; (1996) 383 US 1, 8 at n2. I realise that 1813 was not actually in the eighteenth century, but Jefferson was formed as an 18th century Enlightenment man and so I think it’s reasonable to call him one.

[32] Ross, J C, Wasserman, J A, “Trade-related Aspects of Intellectual Property Rights” in The GATT-Uruguay Round A Negotiating History Vol II (1986–1992), Stewart, P (ed) at 2255.

[33] Inlow, above n5 at 60ff.

[34] Armstrong, G, “From the Fetishism of Commodities to the Regulated Market: the Rise and Decline of Property” (1988) 82 Northwestern U LR 79 at 84.

[35] Id at 85.

[36] Reprinted in Jefferson, above n24.

[37] Corones, S, Restrictive Trade Practices Law (1994) at 5.

[38] Kastriner, L G, “The Revival of Confidence in the Patent System” (1991) J of the Patent and Trademark Office Soc 5 at 8. The strong presence in the “academic” literature of patents and patent law of authors who either are, as Kastriner is, strongly professionally and, therefore, financially involved with patent-owning corporations or whose patent research is funded by such corporations or their lobby-groups is a concern. In Rapp, R T, and Rozek, R R, “Benefits and Costs of Intellectual Property Protection in Developing Countries” (1990) 24 J of World Trade 77, for instance, the authors conclude that increased protection of intellectual property rights is a desirable goal for developing countries. This is a supportable though contentious conclusion, but it is relevant and worrying that the research funding for the paper was provided by the Pharmaceutical Manufacturers Association. Tim Roberts, the author of an article stringently critical of attempts to control the grant of patents over the products of biotechnology, above n6, is described in that article as “[t]he author works in industry and is Chairman of the Biotechnology Committee of the Chartered Institute of Patents Agents.” And so on.

[39] Rich, G S, “Are Letters Patent Grants of Monopoly?”(1993) 15 Western New England LR 239 at 251–255.

[40] Id at 254, referring to an earlier remark by Dean Wigmore.

[41] United States v Dubilier Condenser Corp, [1933] USSC 85; 289 US 178 (1932) at 186.

[42] Above n39. Rich is a Circuit Judge on the United States Court of Appeals for the Federal Circuit.

[43] Quoted in Mandich, above n21 at 176.

[44] Above n3 at 5–7; Schumpeter’s work is called seminal in this paper at 6. See also Norman, N R, “Patent Law Revision: Some Economic Considerations” (1984) 12 ABLR 226 at 229.

[45] De Benedetti, F, “An Economic and Political Analysis of Changes in the Patent System” (1983) 5 European Intellectual Property Rev 295 at 295.

[46] Above n3. Here is a nicely compressed account of the whole chain of reasoning, “... the number of inventions increases with research and development expenditure, productivity increases with the number of inventions and economic well-being increases with productivity”: Oddi, above n25 at 282.

[47] For an analysis of the patent-inducement theory, see Oddi, above n25 at 277–281.

[48] See Loughlan, P, “Of Patents and Patients: New Monopolies in Medical Methods” (1995) 6 AIPJ 5; McCoy, T J, “Biomedical Process Patents” (1992) 13 J of Legal Med 501; Burch,G E, “Ethical Considerations in the Patenting of Medical Processes” (1987) 65 Texas LR 1139 at 1143; Loughlan, P, “The Pallin Patent Overturned” (1996) 9 Aust Intell Prop Bull 46.

[49] One might, in wondering about where the TRIPS requirements on domestic patents regimes may lead the relations between the developed and the developing world, do worse than ponder the lead-in words to a newspaper column entitled “Patents and World War III”, which appeared in The Hindu on 2 August 1996, “If wars are about fighting for control over another’s territory, World War III has already begun over patents and other related issues under the WTO.” See The Hindu Online http://www.webpage.com.hindu.960803/05/0212c.html.

[50] Mokyr, J, The Lever of Riches: Technological Creativity and Economic Progress (1990) at 261.

[51] Id at 177.

[52] Id at 297. Mokyr distinguishes these two types as macro-inventions and micro-inventions respectively and, at 297, claims that the relationship between the two is “the most fundamental complementarity of the economic history of technological change.”

[53] The glue which makes possible the ubiquitous Post-It note was one such discovery. The nondrying lightly-sticking glue was discovered only in the course of searching for a very sticky, very aggressive glue and was initially rejected as a failed effort.

[54] Merges, R P, Nelson, R R, “The Complex Economics of Patent Scope” (1990) 90 Columbia LR 839.

[55] Above n3 at 24.

[56] Mokyr, above n50 at 177.

[57] Above n3 at 24, which refers to a “converging opinion”, as a result of several empirical studies, that patents are of considerable importance in areas like pharmaceuticals and considerably less important in the major engineering areas.

[58] The studies referred to are by Levin, R C, Klevorick, A K, Nelson, R R, and Winter, S G, “Appropriating the Returns From Industrial Research and Development” (1987) Brookings Papers on Economic Activity at 783.

[59] Taylor and Silberston, above n2 at 26.

[60] Id at 25.

[61] Mandeville, above n4 at 121. See the conclusion at 101 that “excluding drugs, patent protection did not seem essential for the development and introduction of at least three-quarters of the patented innovations studied here.”

[62] May, D K, “Pharmaceutical Crisis in India: Transcending Profits With Human Rights” (1991) 10 Wis Int’l LJ 41 at 41.

[63] The outcry over the patent led the Indian Government in October 1996 to file an action for revocation of the patent at the US Patent and Trade Mark Office in Washington. See Agarwal, A, and Narain, C, “Pirates in the Garden of India” (1996) 152 New Scientist 14.

[64] More than three dozen patents have been granted in Europe and the US to non-Indian patentees over product pesticides derived from the neem tree. Id at 14.

[65] See Patents Act 1977 (UK), s1. There was in the early part of this century a significant international movement to have “pure” scientific discoveries given patent-like property protection. See Silverstein, D, “Patents, Science and Innovation: Historical Linkages and Implications for Global Technological Competitiveness” (1991) 17 Rutgers Computer and Tech LJ 261 at 298–301.

[66] See Patents Act 1990 (Cth) s14.

[67] Id at s40.

[68] Above n3 at 45.

[69] Silverstein, above at 279.

[70] Wood, F Q, “The Commercialisation of University Research in Australia: Issues and Problems” (1992) 28 Comp Educ 293 at 300.

[71] (1994) 50 FCR 1.

[72] Langford, J W, “Secrecy, Partnership and the Ownership of Knowledge in the University” (1991) 6 Intell Prop J 155; Loughlan, P, “Of Patents and Professors: Intellectual Property, Research Workers and Universities” [1996] 6 Eur Intell Prop R 345 at 348–349; Leskovac, H, “Ties that Bind: Conflicts of Interest in University-Industry Links” (1984) U Cal Davis LR 895 at 904; Id at 305. See also, Loughlan, above n48 at 13.

[73] Loughlan, above n72 at 349; Rahm, D, Bazeman, B and Crow, M, “Domestic Technology Transfer and Competitiveness: An Empirical Assessment of Roles of University and Governmental R&D Laboratories” (1988) 48 Pub Admin R 969.

[74] Kadidal, S, “Plants, Poverty, and Pharmaceutical Patents” (1993) 103 Yale LJ 222 at 228.

[75] Above, n32 at 2255.

[76] Mandeville, above n4 at 203.

[77] Shuchman, H, Information Transfer in Engineering, The Futures Group, Washington DC, (1981).

[78] Above, n3 at 31. See also de Benedetti, above n45 at 296; Taylor, above n2.

[79] Above, n3 at 31–32.

[80] Id at 31.

[81] Kitch, E W, “The Patent Policy of Developing Countries” (1994) 13 UCLA PBLJ 166 at 171.

[82] Id at 172.

[83] A recent report of UNCTAD (United Nations Conference On Trade and Development), released on 6 March 1997, on the long-term costs and benefits stemming from the TRIPS Agreement, concluded that the negative effects of the agreement would be most pronounced in “those nations in which technological development is rudimentary.” Bangladesh, for example. An inquiry into the effects on social welfare arising from the increased patent protection for pharmaceuticals required by TRIPS concludes that such protection will result in a net social loss, calculated on a global basis, wherein “welfare losses to individual countries outweigh the gains to pharmaceutical producers.” See Subramanian, R, “Putting Some Numbers on the TRIPS Pharmaceutical Debate” (1995) 10 Int’l J of Tech Management 252 at 263.

[84] Barry, R S W, “The Effect of GATT and TRIPS on UK Patent Law” (1996) Patent World 13 at 14.

[85] Braga, above n29 at 252.

[86] Above n32 at 2268 –2271.

[87] Id at 2263. In considering the line-up of countries on different sides in the GATT negotiations over intellectual property rights, it is worth keeping in mind the results of a United Nations study on technology in developing countries which found that, in developing countries, on average, 84 per cent of patents taken out are held by nationals of the United States and Europe and only 1 per cent of patents are held by the nationals of their own country. See UNCTAD Secretariat, The Role of the Patent System in the Transfer of Technology to Developing Countries, UN Doc No TD/B/AC 11/19 (1974).

[88] Doane, M, “TRIPS and International Intellectual Property Protection in an Age of Advancing Technology” (1994) 9 Am U J Int’l L and Pol’y 465 at 494; See also Braga, above 29 at 252.

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