"To put it simply," testified Prof. Robin Feldman, "shell games and hide-and-seek rarely make for an efficiently functioning market." (Photo from House Committee on Energy & Commerce's Subcommittee on Oversight & Investigations).
The US Patent & Trademark Office held its hearing on Creating Transparency in Ownership of Patents & Patent Applications today at UC Hastings.
Testimony provided by Robin Feldman, Professor of Law & Director of the Institute for Innovation Law at UC Hastings is reprinted here and highlights of key points are summarized below:
"To put it simply," writes Feldman, "shell games and hide-and-seek rarely make for an efficiently functioning market."
- As the secondary market for patents expands, society must ensure sufficient information so that the market functions efficiently.
- Information is a great leveler; it can help address the imbalance between how cheap it is to launch a patent demand and how expensive it is to determine whether the demand has merit.
- Understanding the money flow as well as the formal control structures will be essential for understanding who is really in control.
- Allowing vast networks of hidden behavior has the happy coincidence of preventing regulators from observing behavior. Public and private antitrust actors, as well as securities regulators, should be able to connect the dots that can reveal troubling patterns of behavior.
Commending the USPTO for its revised proposals and noting that they are “a much needed effort to strike at the heart of transparency problems,” Professor Feldman suggested tightening three areas of the proposed rules that could allow patent holders to evade the regulation. (The full testimony provides examples of current patent owners and how the rules might fail.)
- First, the antitrust thresholds referenced in the rules are too loose a sieve to catch all of the relevant information.
- Second, the language related to “hidden beneficial owners”—that is, those who try to avoid detection—should be strengthened. Explicit reference to securities law disclosure concepts could ensure that the rules cover not only today’s evasion techniques but also tomorrow’s.
- Third, the rules require updated information at only a few times during the twenty-year term of the patent. Occasional information does not provide the robust information necessary for an openly functioning market.
"In short, patents are imbued with public interest by virtue of the fact that they are a government grant, bestowed only for purposes enshrined in the Constitution itself. As with the trading of public securities, the trading of an asset imbued with the public interest must be sufficiently regulated to ensure proper functioning of that trading market."
Alex A.G. Shapiro
Director, Communications & Public Affairs
UC Hastings College of the Law
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