Changes

*Many patents are approved because [[United States Patent and Trademark Office]] examiners don’t have time or resources to search all the relevant references**The current patent backlog, as of January 2016, is 561,585. [http://www.uspto.gov/dashboards/patents/main.dashxml (USPTO)]**Total Pendency, time between patent filing and patent action, is 26.1 months, as of January 2016. [http://www.uspto.gov/corda/dashboards/patents/main.dashxml?CTNAVID=1004 (USPTO)]***Total Pendency goal time is 20 months by FY2019. [http://www.uspto.gov/corda/dashboards/patents/main.dashxml?CTNAVID=1004 (USPTO)]

The current patent system allows companies to file for the right to exclude if they have a novel, non-obvious invention. The right to exclude creates a temporary monopoly for a certain product, which leads to higher product costs for the consumer. One example of a patent leading to exorbitantly high prices would be Daraprim, a drug produced by Turing Pharmaceuticals. Martin Shkreli, the CEO of Turing Pharmaceuticals, led the charge to increase the price of Daraprim from $13.50 to $750 per pill. [http://www.bbc.com/news/world-us-canada-34331761(BBC)] Critics of the current patent system also believe it does not incentivize enough research and development for drugs that benefit society as a whole. [http://articles.economictimes.indiatimes.com/2012-05-28/news/31877151_1_drug-prices-intellectual-property-innovation (Economic Times)]

Because of such abuses of patent protections, economists and legislators have advocated for a prize system (see [[Medical Innovation Prize Fund Act]]) instead of a patent system for pharmaceutical drugs.[https://www.washingtonpost.com/national/health-science/radical-bill-seeks-to-reduce-cost-of-aids-drugs-by-awarding-prizes-instead-of-patents/2012/05/19/gIQAEGfabU_story.html(Washington Post)] Under this system, companies that invent a new drug will receive a lump sum prize. The rights to the drug will then be placed in the public domain, creating generic drugs. The biggest benefit of a prize system is the ability to target research towards a specific problem. With prize money as the incentive, research companies are more likely to devote time and resources towards the identified issue. In addition, the prize system lowers barriers to entry; nontraditional parties are encouraged to participate.

=== Problems & Considerations Surrounding the Prize System=== No one knows the economic effects of prize systems; there is lack of empirical evidence supporting the benefits of a prize system over a patent system. There are several factors that need to be considered in creating a prize system [http://www.bu.edu/law/journals-archive/scitech/volume131/documents/wei_web.pdf (BU)]: '''Valuation Problems'''What is the criteria for awarding a prize and how much prize money is each innovative drug worth? This is one of the biggest problems in establishing a prize system. Prize payments that are too low won’t provide enough incentive, while payments that are too high may incur resource duplication costs. The Medical Innovation prize payment amount also has to be individually tailored to the benefit of the drug. People suggest the value of the payment be dependent on the ‘social value’ of a drug, but how is that social value determined? Will a distinction be made between medically necessary drug inventions and lifestyle improvement drugs (e.g. acne medication)? '''Timing of Prize Fund ActPayments'''The timing of the prize payment has to be timed well; if awarded too early other companies may not be incentivized to produce a drug that would’ve been higher quality than the drug that won the prize. After the prize is awarded, incentive to commercialize the drug is reduced since there is no patent system. One potential solution is to defer prize payment until there has been a certain degree of commercialization. '''Administrative Problems'''The MIPF creates a board of trustees that has the responsibility of awarding prize payments. Though the board of 13 members is designed to be unbiased, it is unlikely that they will not be subject to political and external pressures, leading to a distorted allocation of resources.  A negative aspect of the patent system is the controversy and dispute that follows patent distribution of benefits. We can expect that there will also be challengers regarding the recipient of prize payments, thus the prize system has to specify how to resolve disputes, and also develop a thorough screening mechanism to confirm the reported benefits of the invented drug. ==Patent Pools== Patent pools are agreements between "two or more patent owners to license one or more of their patents to one another or to third parties." [http://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf (WIPO)] Generally, patent pools cover mature and complex technologies that require complementary patents to develop compatible products and services. [http://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf (WIPO)] Patent pools are useful when new products are based on multiple existing patents or on one invention with patents on many of its components. [http://www.theglobalipcenter.com/sites/default/files/reports/documents/Prizes__Patent_Pools.pdf (GIPC)] ===Benefits===Ideally, companies are able to reduce costs during product development by using patent pools to share intellectual property assets. Patent pools would be able to increase efficiency and positively affect competition and innovation. [http://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf (WIPO)] In a situation in which two companies own different IP assets that are not enough to create specific products, these companies would be blocking each other's patents and preventing the introduction of an innovative product or service to the market. Patent pools deals with these inefficiencies by organizing complementary IP assets under one contract. [http://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf (WIPO)] Companies can also reduce the amount spent on litigation by settling disputes with the creation of patent pools. This would benefit small- and medium-sized businesses that usually cannot afford the costs of expensive litigation. [http://www.wipo.int/export/sites/www/ip-competition/en/studies/patent_pools_report.pdf (WIPO)] ===Risks=== Patent pools have many flaws, which may explain why they have been used so infrequently. [http://www.theglobalipcenter.com/sites/default/files/reports/documents/Prizes__Patent_Pools.pdf (GIPC)]

The Medical Innovation Prize Fund Act, introduced in 2013 and sponsored by Bernie Sanders was designed to transform '''Elimination of Competition''' Opponents criticize patent pools for the patent system into a prize system. It died in a previous session potential of Congressanti-competitive behavior and collusion. The Act would enact a prize system for all ‘medical innovations relating According to a drugthe World Intellectual Property Organization, "a biological product, or patent pool may be regarded as a new manufacturing process for a drug or biological product’ cartel." [httpshttp://www.govtrackwipo.usint/congressexport/billssites/113www/s627ip-competition/summaryen/studies/patent_pools_report.pdf (WIPO)]. The plan establishes an annual fee Patent pools potentially create a way for health insurers companies to fund this Actshare competitively sensitive information, which would go into a Medical Innovation Prize Fund (MIPF). Prize payments would be distributed from MIPFsuch as pricing, marketing strategies, and the payments would total 0or R&D information among its members.5% of GDP from the preceding fiscal year " [http://www.buwipo.eduint/lawexport/journalssites/www/ip-archive/scitechcompetition/volume131en/documentsstudies/wei_webpatent_pools_report.pdf(WIPO)].

Besides providing incentives '''Licensing Practices''' If a patent pool restricts its members from licensing its patents independently, it lowers the incentive to invest in R&D in new medicines, produce alternatives and allowing inflates the government to target research in costs of goods or technology for consumers. The Department of Justice and Federal Trade Commission state that restrictions on licensing may create "a specified area, this act also encourages parties barrier to invest in major breakthrough drugs versus only improving drugs in entry if existing classes. The MIPF would reward innovations based on incremental benefit, so the largest prizes would be given relationships make it harder for 'new firms to first-come in-class drugs. The value of the prizes will be determined based on the number of patients, incremental therapeutic benefits of the innovation, the pertinence of the innovation, and overcome the improved efficiency of the manufacturing process for the drugpatent thicket'." [http://www.justice.gov/sites/default/files/atr/legacy/2007/07/11/222655.pdf (DOJ)]