Opinion

Fixing U.S. Innovation Policy Is Literally a Matter of Life and Death

By David J. Kappos
May 27, 2020 at 5:00 am ET

The COVID-19 pandemic has us in search of that elusive answer to the question: What went wrong?

To start, it certainly was not a lack of warning signs. Five years ago, Bill Gates started shouting from the rooftops that the world was not ready for this. He has been proven right. Here in the United States, the CDC’s go-to tagline for encouraging vaccines is “it is always better to prevent a disease than to treat it after it occurs.” The death and despair caused by COVID-19 certainly proves it was onto something.

So, what did go wrong? American innovators have been handcuffed by the courts and by burdensome interventions that have stripped away the incentive for our brightest minds to invest the resources needed to create new diagnostic tests and vaccines.

Developing diagnostic tests and vaccines is not easy. Nor is it cheap. They cost upwards of $500 million to develop and can take fifteen years to reach the market. To promote the costly and time-intensive development of diagnostics and vaccines in the U.S., adequate incentives are critical. Our country has long incentivized these societally beneficial innovations through patent protection — a government-provided right enabling innovators to recoup their investments and encouraging them to make further investments.

However, disastrous decisions by U.S. courts over the last decade have drastically reduced patent protection for precisely the kinds of innovation we now need so desperately. And no surprise — dramatic reductions in investment and innovation followed the dramatic reduction in patent protection.

In 2012, the Supreme Court upended the expectations of innovators and investors by eliminating patent eligibility for broad swaths of innovation. Since that sea change, courts have greatly harmed the U.S. industry by invalidating patents covering innovations ranging from diagnostic methods for dangerous diseases to DNA primers used in drug development to software algorithms that undergird modern life sciences innovation

This uncertainty has unsurprisingly reduced industry’s ability to address patient needs. Testifying before Congress, an executive at Regeneron Pharmaceuticals — a New York-based biotechnology company developing a leading COVID-19 antibody treatment — warned that the inability to obtain patent protection covering genetic innovations will disincentivize investment and collaboration.

Worse still, innovators and investors now face the specter of forced nationalization of successful vaccines and diagnostics. 

These uncertainties have contributed to a reduction in the percent of venture capital invested in pharmaceuticals from around 5 percent of total venture capital in 2009 to less than 1 percent in 2017.

Had U.S. innovation policy been properly calibrated in the last decade to promote their innovations rather than hampering them with investment-sapping uncertainty, who knows what further good innovators could have already accomplished in the fight against COVID-19.

That’s why Congress must act now to pass legislation to reverse the Supreme Court decisions that created the mess in the first place. In fact, Sens. Chris Coons and Thom Tillis already proposed a very viable blueprint for such legislation, which now can be included in the next coronavirus stimulus bill to restore predictability and stability. If passed, we’ll see a return to the strong incentive effect of the patent system that will engender the private sector investment we desperately need to finally get ahead of the pandemic treadmill we find ourselves on.

The COVID-19 pandemic is tragic. It, and the pandemics to come, will worsen if we do not fix the U.S. patent system to once again promote investment and innovation in diagnostics and vaccines.

From August 2009 to January 2013, David Kappos, now a partner at Cravath, Swaine & Moore LLP, served as Under Secretary of Commerce and Director of the United States Patent and Trademark Office.

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