Public Hearings Concerning the Evolving Intellectual Property Marketplace #540872-00014

Submission Number:
Scott Shane
Case Western Reserve University
Initiative Name:
Public Hearings Concerning the Evolving Intellectual Property Marketplace

Before the FEDERAL TRADE COMMISSION Washington, DC 20580 _____________________________________ ) Hearing on Evolving IP Marketplace – ) Evolution of Remedies ) Comment, Project No. P093900 February 11 and 12, 2009 ) ________________________________) COMMENTS OF SCOTT A. SHANE, PH.D. Scott A. Shane, Ph.D. Professor of Economics Case Western Reserve University February 5, 2009 Comments of Scott A. Shane My name is Scott A. Shane. I am Professor of Economics at Case Western Reserve University in Cleveland, Ohio. I have taught the economics of technological change, technology management, and entrepreneurship for twenty years. I am the author or editor of 14 books and over 60 articles on entrepreneurship and innovation, including the role of intellectual property in those arenas. My full curriculum vita is available at On January 14, 2009, I released a research paper entitled “The Likely Adverse Effects of an Apportionment-Centric System of Patent Damages” which analyzes the impact of “apportionment of damages” legislation considered in the 110th Congress. The paper was commissioned by the Manufacturing Alliance on Patent Policy, an ad-hoc coalition of manufacturing organizations formed to provide policy makers information on the effects of various patent law proposals on the manufacturing sector ( To establish the foundation for this research, I first probed whether the apportionment legislation would increase or decrease typical patent damage awards, and by how much. To answer the question, I surveyed a randomly selected group of over 900 law firm patent attorneys. Twenty-two percent of survey recipients responded. After reviewing the apportionment legislation passed by the U.S. House of Representatives in September 2007, the respondents indicated in the median that average patent damage awards would decline between 20 and 39 percent as a result of the legislation. Based upon these survey results, my analysis indicates that the following range of effects would likely follow from apportionment of damages legislation: 1. Reduction in U.S. patent value of between $34.4 billion and $85.3 billion. 2. Reduction in value of U.S. public companies of between $38.4 billion and $225.4 billion. 3. Reduction in Research and Development of between $33.9 billion and $66 billion per year. 4. Between 51,000 and 298,000 U.S. manufacturing jobs put at risk. 5. Industries employing fewer people favored over those employing more people. The full paper is submitted to the Commission as an attachment to these comments, and is also posted at This research is relevant to the Commission’s jurisdiction pertaining to competition and consumer protection. A reduction in value of U.S. public companies, for example, would reduce the value of consumer investments in those companies. A reduction in Research and Development would adversely impact the competitiveness of U.S. companies and the consumer benefit normally resulting from new products. Reduced employment, obviously, has a series of negative consequences for consumers and may adversely effect competition. I urge the Commission to consider my research, and to conduct additional empirical research, on the impact of an apportionment-centric system of patent damages. Making apportionment the preeminent factor of consideration in patent damages calculations would be a significant change to the current system, and its effects on competition and consumer welfare should be understood by policy makers before such a change is made. Respectfully submitted, Scott A. Shane /s/ Scott A. Shane Scott A. Shane, Ph.D. Professor of Economics Case Western Reserve University February 5, 2009