Magdalena Christoforou is a J.D. Candidate, 2021 at NYU School of Law.
In 2009, British inventor, Trevor Baylis urged the UK government to make patent infringement a criminal offense. His justification for the proposal was simple:
“If I was to nick your car, which is worth £10,000, say, I could go to jail, but if I were to nick your patent, which is worth a million pounds, you’d have to sue me. And if I was a colossal company, or indeed another country, that had stolen your invention, how could you find a million pounds a day to take me to court?”
Baylis’s proposal was immediately met with vehement criticism from patent professionals, with some patent attorneys going so far as to call the idea “barking mad.” Yet, criminalizing patent infringement is hardly unprecedented. In the European Union, all but six member states provide for criminal sanctions for willful patent infringement. In 2006, Japan went so far as to increase its criminal sanctions for willful patent infringement, raising the fine from 5 million to 10 million Japanese yen, and the prison sentence from 5 to 10 years. Japan’s purpose in amending its laws was clear: to ensure that patent infringement was more robustly deterred.
At first blush, making willful patent infringement a criminal offense carries some intuitive appeal. Willful infringement covers conduct that is particularly detrimental for the patent system, including deliberate copying of established patent rights. The threat of criminal punishment could enhance deterrence of such egregious behavior and consequently curb harmful infringement and significant losses to patent owners. Imposing criminal penalties could also serve an important expressive function in the patent arena by communicating to inventors that society values their innovative contributions and condemns infringing activity that seeks to copy these breakthroughs. Promoting such goals could lead patent owners to feel that their intellectual property rights are more secure, which could incentivize further investment into technological innovation. Despite the potential merits in introducing such criminal sanctions into the patent system, the United States, in juxtaposition to countless other countries, has refrained from introducing such penalties. Why might this be?
There are a number of reasons why criminal sanctions may not have been introduced to sanction patent infringement in the U.S. thus far. Perhaps the most significant reason is rooted in a concern that criminal penalties could overly deter innovation in a way that would be detrimental to social welfare. Even if such sanctions were focused only on punishing infringement that is willful, many patent scholars have raised the concern that criminal penalties could overly chill innovation. This is because the validity of a patent and the scope of its protection as delineated by its claims are often subject to disagreement. Competitors may consequently willfully proceed with an infringing act if they believe there is a strong chance their acts fall outside the scope of the patent’s claims, or if they believe the patent is invalid. The threat of criminal punishment could have the effect of inducing competitors to take overly conservative approaches to such questions, which could reduce improvements on existing technologies, and unduly extend the breadth of patent protection. Willful infringement can also provide social benefits by forcing the litigation of patents that are invalid, which could open up previously blocked off areas of technology to further development. Competitors may choose not to take this risk if they face criminal fines or imprisonment, should the patent rights be upheld.
Apart from concerns that criminal penalties could overly chill technological development, another reason why the U.S. may not have introduced criminal law to sanction willful patent infringement relates to the institutional burdens such penalties could impose on the criminal justice system and prosecutors. During the course of a patent infringement trial, courts are forced to grapple with complex technical issues. Many scholars have raised the concern that prosecutors would be ill-equipped to handle issues of patent infringement, since many lack relevant technical training. Further, since many patents are held invalid during the course of litigation, prosecutors may become reluctant to expend resources in prosecuting such infringement when it is highly unlikely the patent rights they are trying to vindicate will be upheld. Such a reluctance has been seen in countries that do provide for criminal penalties for patent infringement. For example, scholars in Korea have traced the low rates of criminal patent prosecutions to the reluctance of prosecutors to become mired in technical subject matter and risk pursuing charges for patents that may be struck down. Any benefits that the criminal law could bring in deterring acts of patent infringement more stringently could be rendered meaningless if prosecutors are unwilling to bring such actions.
Finally, the lack of consensus among industry groups regarding the proper level of protection that should be awarded to patents may be another reason why criminal sanctions have not been introduced to penalize willful patent infringement in the U.S. Large software companies typically favor a lower level of patent protection to avoid treading on the patents of small companies, which may block off large areas of technology through small iterative developments. On the other hand, large companies in the biotechnology and pharmaceutical sectors typically prefer strong enforcement of their patent rights to obtain an optimal level of market exclusivity. Since large software companies and pharmaceutical companies are the two most influential lobbying groups in the patent arena and have conflicting interests with regard to the scope of patent protection, it would likely be difficult to achieve consensus in passing a criminal law that could substantially bolster patent rights. Yet, even groups who favor stronger patent protection, such as large pharmaceutical companies, will find themselves as defendants in patent infringement suits when they engage in activity that seeks to improve upon other companies’ drugs or release generic versions of those drugs. Facing the threat of criminal prosecution as they test the bounds of other patents may very well spur these groups to side with large software companies in defeating proposals for criminal sanctions as well.
Though Baylis’s proposal to criminalize patent infringement may not be completely “barking mad,” it certainly comes with a number of countervailing considerations. Not only could such penalties have a chilling effect on innovation, they also could impose institutional burdens on criminal courts and prosecutors. Any added benefits such penalties could bring in more robustly protecting patent rights would thus likely pale in comparison to its pitfalls. Legislators would be right to remain wary of these problems if they ever choose to seriously consider a proposal like Baylis’s in the future.