A Penalty on Innovation?
Stephen J. Susalka, PhD, CLP, RTTP
AUTM Chief Executive Officer
University technology transfer has seen its fair share of challenges recently, but the latest rumored proposal from the U.S. Commerce Department to institute a radical new fee structure based on patent value (effectively an “innovation penalty” would have a seismic effect on our field.
On July 28th, the Wall Street Journal published that the “Trump administration is considering a plan to raise tens of billions of dollars with a new fee that would transform the patent system” in order to raise revenue for the government.
Although the details are sketchy at this time, the general idea is that patent holders would be charged between 1% and 5% of their overall patent value (similar to paying property tax on your house).
Should this proposal be pursued, my understanding is that your institution would somehow be responsible for (a) valuing each of your patents (without the benefit on a "Zillow” like calculator) and (b) paying 1% to 5% of that value (it is unclear whether that is only upon execution of a license on that patent or if it the fee is assessed regardless of its licensing status – but in either case I don’t need to tell you how challenging it is to accurately value a patent on an early-stage innovation…). No mention was made of whether that fee is refunded if the patent is found to be invalid downstream (the patent value would be $0 – or less!).
Article I, Section 8, Clause 8 of the U.S. Constitution, known as the Intellectual Property Clause, says “to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” This clause grants Congress the power to create copyright and patent laws that incentive innovation. By creating this fee, government would be imposing a burden on ownership and would undermine a fundamental freedom outlined in the Constitution.
This proposal has been met with disbelief and dread by innovative companies, universities and other organizations across the country. Rather than driving innovation forward, as the U.S. patent system has done for hundreds of years, this “innovation penalty” will stymie the next generation of life-changing products and services.
Intellectual property results in business growth, job growth, and new products on the market, which generate income, payroll, sales, and corporate taxes. There are many ways to increase revenue for the government (for which technology transfer is a driver), but this proposal is simply not one of them.