Strong IP Protections Are Critical to Ensuring Continued U.S. Innovation Leadership

Tue, 17 Mar 2026

David Kappos, Co-Chair of the Intellectual Property Practice at Cravath, Swaine & Moore LLP, and former Undersecretary of Commerce and Director of the U.S. Patent and Trademark Office, discusses how strong intellectual property (IP) protections are essential for the U.S. to continue to lead the world in innovation, the importance of IP protections to attract capital necessary to innovate, and the need for Congress to act to fix issues dealing with injunctive relief for patent infringement, patent eligibility, and the Patent Trial and Appeal Board (PTAB).

Transcription

Giachino (00:05.0210 - 00:34.0000)

Welcome to IP Protection Matters. I'm your host, Renee Giachino. Today, we are joined by David Kappos. He's the Co-Chair of the Intellectual Property Practice at Cravath, Swaine & Moore LLP. He also served as Undersecretary of Commerce and Director of the U.S. Patent and Trademark Office. We'll be talking today about the importance of reliable pro-innovation policy frameworks for the U.S. to remain a leader in innovation. David, welcome to IP Protection Matters.

Kappos (00:34.0000 - 00:36.0849)

Hi, Renee. Happy to be on with you.

Giachino (00:37.0409 - 00:52.0500)

I like to start these discussions by asking what may sound like a simple question, but I know the answer is never quite simple. Why should we care about IP protections? In other words, why does IP protection matter?

Kappos (00:52.0680 - 01:37.0629)

[IP protection matters] if you want to cure diseases. If you want your kids and grandkids to be healthier. [If] you want opportunity, jobs, increased standards of living, new products and services that are aimed to increase both our ability to be successful as humans and also our enjoyment as humans. If you want any of those things, let alone all of them, that's why IP matters because it's intellectual property that enables great ideas to get matched with the capital that's required to perfect them, test them, make products out of them, and bring them into the marketplace.

Giachino (01:38.0050 - 01:50.0800)

Let's go back a little bit in time. You served as director of the USPTO, the Patent and Trademark Office. How do you define a patent, which is obviously one form of intellectual property protection?

Kappos (01:51.0139 - 02:41.0350)

A patent is the form of IP (intellectual property) protection that protects ideas and inventions. So if you are a craftsperson and you create a new kind of chair that's never existed before, the most likely kind of protection that could be available for it would be patent protection. If you had been the person that invented the wheel, it would have been eligible for patent protection. If you were the person who invented the wagon that goes along on 2 or 4 wheels, it probably would have been subject for patent protection had a patent system existed back then. So inventions - brand new ideas - are the thing of patent protection.

Giachino (02:41.0649 - 03:18.0880)

I've heard you and others say that one innovator stands on the shoulders of the previous innovator. That allows the patent application to incentivize more innovation. Can you briefly explain then how it is that an innovator gets a limited amount of time of exclusivity, because I think there's this false impression out there that once someone has issued a patent, no one can either build on it or even develop something similar, if not the same, so to speak.

Kappos (03:19.0199 - 05:13.0119)

So the whole notion, like you said Renee, of standing on the shoulders of giants or those who came before us is a major component of the patent system. To get a patent, you have to agree to describe your invention and provide pictures of it and how it works so that others can make it and so that they can use it. The idea there is that the patent system creates an ever-growing corpus of publication of inventions that have been made on literally a daily basis as time goes on. The whole reason for that is to enable others who want to use your invention and build new things on top of it to do that.

An example is the smartphone, which is a platform. There are many companies that participated in the creation of the smartphone. But it created the platform for an entire industry of apps. If you think about the Ubers of the world, the Lyfts of the world, the DoorDashers of the world, the Airbnbs of the world, all of these platform applications didn't exist and couldn't have existed until the smartphone was created. Once that basic piece of technology was created, all of those apps and many thousands of others were able to stand on top of the shoulders, if you will, of the creators of the smartphone, take advantage of the patent system, and build new apps that create all kinds of economic benefit and other benefit for people.

Giachino (05:13.0470 - 05:36.0776)

Our guest is David Kappos. David, it's said that you were instrumental in achieving the greatest legislative reform of the U.S. patent system in generations through the passage and implementation of the America Invents Act, which was ultimately signed into law by President Obama back in 2011. Can you give us sort of a cliff note version of this law and its importance?

Kappos (05:37.0105 - 09:12.0380)

First of all, it's been said, I didn't say it, but others have. The America Invents Act was a large piece of legislation, and so it did a lot of things. I would say first and foremost things that people don't think about much nowadays. It enabled the USPTO to set its own fees for the first time in history. That's really important when you're an agency with around a $4 billion budget and somewhere around 15,000 employees and you're totally self-funded. The PTO doesn't use taxpayer dollars. It funds itself and its operations through its collections of fees. In order to have a sensible funding mechanism and process, any agency has to have control of its budget. And so the AIA got that done for the USPTO.

It also [allowed] the U.S. to join the rest of the world in granting patents to the first inventor who files for a patent application. So you've got to be an inventor to get a patent, but you also have to actually file a patent application. When, as occasionally happens, simultaneous or near simultaneous inventors file patent applications at about the same time or create inventions at about the same time, some mechanism is needed to award what's called priority or to decide who gets the patent. Importantly, the AIA moved the U.S. to the same standard that's used everywhere else in the world, which is to say the first inventor who also files a patent application, wins in those priority contests. So that's the second thing the AIA did.

The AIA also statutorily put into place what we call “Track One” patent applications - the ability to pay a modest fee and get a patent issued in a matter of months rather than a matter of years. The so-called Track One didn't exist before the AIA, and we got that done. The AIA also permits the submission of prior art to be used by examiners and published pending patent applications by third parties. That pre-grant review system, which is free for up to three references, didn't exist before. We got that done in the AIA.

Then I guess on the more controversial side, the AIA also created an adjudicatory body that decides on the validity of patents after they've been issued by the USPTO. It's called the Patent Trial and Appeal Board, the PTAB, and that's a large administrative corps of judges with lots and lots of rules and process that was mandated by statute in the AIA. So that's a few examples, Renee. There's a lot of other things. We don't have time to cover all of them, but these are some of the improvements that were enacted in the legislation by the AIA.

Giachino (09:12.0840 - 10:30.0489)

Whoever said you were instrumental was absolutely accurate. If my research is accurate, I do understand that you have been quoted as saying that “new treatments, new drugs, new biologics, new diagnostics, and new medical equipment only get funded, only get created, and only get brought to market if they've got strong and effective intellectual property rights behind them.” David, if we want to keep up and continue to out-innovate other countries like China and others, what is it that we need to be doing?

The second part of that question is we hear a lot of talk about drug pricing issues as is relevant to patents. Policymakers seem to be looking for a silver bullet on drug pricing by actually eroding patent protection or devaluing patents through calls for price controls. Most Favored Nation is the term that we all hear. Would something like that be doing more harm than good in most instances, because innovation would be impeded by other countries? Perhaps even China could then take a lead in the biopharma innovation. Isn't that right?

Kappos (10:30.0809 - 14:09.0210)

Just to go back to the first part of your question, Renee, the answer is what do we need to compete against our economic rivals, which are getting stronger by the day. The answer really is pretty simple - a strong and effective IP system. That's the advantage the U.S. has always historically had against other countries. We don't have a planned economy in the U.S. and we don't want one. We don't have a system in the U.S. where the government chooses winners and losers and pours gigantic investments into its winners - preordained government-affiliated companies. We don't have those in the U.S.

What we do have is an authentic and strong system of intellectual property laws, which enable private capital to be brought against great ideas to create products and services in the marketplace. So that's the first part of the answer to your question.

Then focusing Renee, as you did on drug pricing. First of all, we all want reasonable drug prices. There's no debate about that. I don't represent per se the biopharma companies on this call, but I think I can channel them by saying biopharma companies are in the business of curing diseases so that people can get better. They want to see patients use their medicines and, therefore, they want to see drug prices that are affordable also. So there's no disagreement across the board about drug pricing being an important issue and the need for drugs to be affordable.

The problem is the patent system is no place to act on that shared desire. There are plenty of other places to act on it, and there is a vibrant and important legislative and administrative policy discussion that is had and that needs to continue happening about drug pricing, but it's got nothing at all to do with the patent system. As I've said on occasion, pricing is about what's now. The patent system is about what's next. The patent system is about curing diseases that haven't been cured.

And if you step back, Renee, and you think about for a loved one who is suffering from an uncured disease, it doesn't matter how much money you are willing to put against the drug to treat that disease because the drug doesn't exist. You could put everything you have against it and the drug still won't exist. So the price of that treatment is effectively infinite. So what patents do is they bring the price of new treatments down from infinity to some level much lower than infinity. They actually make the new treatment available at some price, and then it's after that the regulators and policymakers need to figure out policies they want to put in place to make sure that those new drugs become available.

But drug pricing in the patent system “ne'er the twain should meet.” Patents should be about incenting new drugs to be developed and introduced, and patient affordability should be addressed in completely separate independent discussions.

Giachino (14:09.0669 - 15:05.0919)

When we talk about investment, I understand that we are generally 5% of the world's population, but we create over 50% of the world's life sciences products and innovations. In order to keep this life science industry robust, we know that we need innovators who want to keep innovating. We need investors who want to continue to invest in the life science industry.

I don't expect you to have these numbers off the top of your head, but to the extent you can even generalize, I think it would help us to see a bigger picture. Can you share with us some numbers in terms of how much on average it costs to take a drug through the process and into the market? And how many on average succeed or fail? I think a lot of us are unaware of that when we talk about how much it costs to bring a drug to market and why this investment is important. To have that investment, you've got to have that patent protection.

Kappos (15:06.0159 - 17:23.0550)

Renee, so doing this off the top [of my head], but I think I can get us pretty close. The cost to develop a new drug on average is between $2-3 billion - billion dollars with a B. Huge amount of money. Even after all of that spend, somewhere around 90% of all new drug candidates fail at some point in the development, testing, and clinical approval process. So it's a hugely risky, time-consuming process to develop a new drug. The 1 out of 10 that succeeds has to make all the money back on the 9 out of 10 that fail. Then it's got to return enough economics to the company that developed the drug in the first place so that they can attract investors and afford to stay in business to create the next new drug.

So when you think about it and then add another piece of data, Renee, that I'm not sure you asked about, but I'll just mention it, which is that the average effective term of patent protection for drugs is somewhere between 12 and 13 years. So even though theoretically patent protection should last for up to 20 years, in the biopharma industry it doesn't. It only really lasts between 12 and 13 years. So what that means is that after you've spent $2-3 billion and you've failed 90% of the time, you finally get the 1 in 10 that hits. You don't have 20 years to make your money back so that you can justify that investment and make up for all the losses from the other 9 investments. You've got between 12 and 13 years to make your money back. So it's a very hard industry to succeed in and it's so capital intensive that really the only way for it to work is when you've got an IP system that supports the huge risks and downsides involved in drug development.

Giachino (17:24.0109 - 18:32.0900)

One final question, David. I had the pleasure of listening in when you served on an excellent panel on litigation leadership that was hosted by the IP Policy Institute. I recall you outlining recent Supreme Court opinions, namely one going back to the eBay case that had significant impact on IP protection in our courts. Unfortunately, we don't have enough time today to delve into that decision itself, but I guess I'm going to ask you a follow-up question to that.

Is it time or even beyond time for Congress to step in and really pick up the reins when it comes to IP protection? I know there are a myriad pieces of legislation that have been under consideration now, some of them for years - the Restore Act, PERA, PREVAIL. Has Congress been shirking its authority, so to speak, and leaving it up to the courts or even the executive branch to set our policy? Do you think that that has resulted potentially in us losing some of the global innovation leadership that we have had?

Kappos (18:33.0310 - 20:21.0069)

Congress definitely does need to step in and act with respect to injunctions which you mentioned, which is the subject of the eBay case that went to the Supreme Court around 20 years or so ago. That one decision has succeeded in robbing the U.S. patent system of its vitality and even its relevance to the point where more and more patent-related policy is being set overseas, particularly in Europe and China. Less and less of it in the U.S. We feel more like we're along for the ride here now than in our traditional role of setting global patent policy.

Indeed, the time has come and then some for Congress to step in and act on this issue of injunctive relief for patent infringement. But also just on the types of inventions that should be eligible for patenting. That's another area of the law that's been damaged by court decisions of the last generation or so.

And I mentioned before when we talked about legislation, the AIA that set up the Patent Trial and Appeal Board and how that body has turned out to be controversial. Well, similarly, there's legislation pending that Congress needs to act on to fix some issues that have come up over the years with the Patent Trial and Appeal Board. And it's high time that Congress acts on all three of those areas, in fact.

Giachino (20:21.0150 - 20:36.0140)

David, we thank you so much for all of the hard work that you do in this arena, for keeping at the forefront of everyone's education, the importance of IP protection and why it matters. We thank you again for your time today and all of your hard work.

Kappos (20:36.0589 - 20:41.0949)

Thank you, Renee, for your interest and for putting this podcast together.

Giachino (20:42.0270 - 20:44.0300)

My pleasure. You have a wonderful afternoon.