One Size Does Not Fit All

The practice of innovation differs greatly across industries, business models and individuals.  However, patent law currently operates under the assumption “one-size-fits-all” is the best way to promote innovation.  The pharmaceutical industry is characterized by huge upfront costs, a long regulatory approval process and distinct inventions covered by relatively few patents per new drug.  By contrast, the software and Internet industries have few natural entry barriers, extremely short technology life cycles and thousands of functions and components per product or service.

Contrast Microsoft, Apple, Facebook and Google with the top five pharmaceutical companies in the world.  The pharmaceutical companies are all well over 100 years old, whereas Microsoft, Apple and Facebook were founded by college dropouts with few resources. Google was literally started in a garage.  None of these companies needed patent protection to motivate them to innovate and all of them dethroned prior high-tech market leaders.  In fact, software was largely thought to be unpatentable until the Court of Appeals for the Federal Circuit — the specialized patent court — engineered its way around Supreme Court precedent to uphold pure software patents.

Intuitively, it makes little sense for a legal system to treat pharmaceuticals and software the same.  The pharmaceutical industry takes 12 to 15 years from the beginning of a research project to the marketing of a successful drug, which often remains commercially viable for decades.  Few software or technology products remain in the marketplace for more than a few years.  In fact, high-tech industry product cycles can be as short as 6 to 9 months.  Given it takes 3 years to get a patent and over 12 years from patent application until the courts rule on infringement, the patent system as currently constructed does not fit well with the fast pace of innovation and product development in the technology industries.  Consequently, it is not surprising that study after study has shown that patent protection is not as important as the advantages gained from being the first-mover in high-tech markets.

In pharmaceuticals, a marketed drug is often protected by a single strong patent.  In high-tech, products consist of thousands of patentable functions and components under current standards. For example, Windows Vista has 160,000 function points, and this does not include higher level aggregations of functions that themselves could be patentable.  Portfolios protect against attacks by competitors and raise the barriers to entry for new entrants.