How the patent system could better solve our government's problems

Many citizens view the patent system as a way to protect ideas. This is true in a broad sense, so long as an inventor reduces her ideas to an actual product or process. What many people don’t know is that our patent system in America is designed to discourage inventors from sitting on their patents rather than using them.

This is particularly relevant to today’s public discussions on energy policy. As a country, we’re facing a crisis in the Gulf of Mexico due to BP’s oil spill, our dependence on foreign oil, and our general lack of viable energy alternatives for creating a substantial portion of our energy needs from renewable or carbon-neutral sources.

The Bayh-Dole Act of 1980 gives the government certain rights to patented technology maturing out of federally-funded research.  I mentioned this act in the context of a law review article published in 2008 on the viability of Americans growing their own ethanol-based fuel. Two rights reserved to the government are key:  first, if the government funds research at an institution, the government need not pay to use the intellectual property arising from such research. That is, the Bayh-Dole Act allows the government to sidestep the artificial markup for patented products that end consumers have to pay. Second, if the owner of the patented technology is not fully exploiting the technology to the benefit of society, the government may license the technology out to firms who will.

Over 7.5 million patents have been granted by our federal government. To point out a few examples, over 15,000 of these patents deal with transmission of electricity. Over 26,000 relate to wells and drilling for oil. 33,000 represent technological advancement in power plants. Nearly 64,000 address radiant (solar) energy.

The 7.5 million patents represent the collective knowledge of the best and brightest from around the world, and many of those patents were the product of federally-funded research. It seems to me that the federal government could mine some of the technology it has already paid for as a start towards creating new energy policies for our future.

BP showed us how liability caps work – poorly

This morning, the Arkansas Democrat Gazette reported on the Arkansas Congressional delegation's involvement in hearings about the Deepwater Horizon oil spill. Congress passed a law in 1990 capping oil companies' liability for oil spills at $75 million. Now, current leadership is considering a repeal of that law. Congressman Boozman supports repeal because he doesn't "want the taxpayer to be stuck with the liability."

This discussion illustrates two things. First, liability caps remove an incentive for companies ensure that they place public safety first. The Deepwater Horizon spill will wind up costing far, far more than $75 million. But, with liability for the spill limited to a fraction of the profits generated by the well and by BP generally, BP had no incentive to place the safety and reliability of its well over profits.

Second, when liability caps are in place, the taxpayer winds up footing the bill for harm caused by the wrongdoer. Whether its BP avoiding liability for environmental damage or a careless motorist avoiding liability for hurting another driver, someone else winds up footing the bill. All too often it is the government, whether it's the Environmental Protection Agency cleaning up oil or Medicare paying for medical treatment that should rightfully be charged to a negligent motorist.

It's strange to me that Congressman Boozman recognizes that we don't want to shift private liability onto the taxpayers, yet he still supports tort reform. Tort reform, at its core, is about shifting financial responsibility for harm caused by a private party to someone else, which all too often is the government payroll.