Contemporary Patent Research Articles

Patent law in comparative context: Differences and similarities of patent law in the European Union, the United States and China

This study presents the main features of patent law in the European Union, the United States and China, with a special focus on patentability. Each patent regime is reviewed in its historical context, exploring the stages leading to the given jurisdiction's contemporary patent law. After mapping the differences and similarities of patent law in the EU, the US and China, possible reasons for the detected divergence and convergence will be explored. This study reveals that the differences in codified patent law between the EU, the US, and China are for the most part a matter of nuance and much of the convergence stems from international harmonization efforts and common historical roots as well as external pressure to convergence in patent law for mainly economic reasons. Whereas patent laws in the EU and US are more established, China's patent law has been moulded into its contemporary form only recently. Differences across the chosen jurisdictions are explained not only by cultural factors but also by underlying theoretical differences in patent doctrine and differing aims of patent protection, as well as the divide concerning the role of statutory law and case law between the common law and Romano-Germanic law.

On the structure of exclusive patent right

Both foreign and domestic doctrine have traditionally considered right to exclude others from use of the invention as a key or even the only component of exclusive patent rights. Economic relations regulated by patent law are currently rapidly developing though, and today we should acknowledge the economic shift that requires reconceptualization of the dominant postulates of patent law theory. In particular, the prevalent economic functions of contemporary patent law are, firstly, technology transfer aimed at disseminating and practical implementation of innovations, and secondly, ensuring optimal allocation of information about innovations for their proper commercialization and commodification, as well as for their further development. In turn, the above functions in terms of patent rights correlate to right to use the invention and to delegate such use to third parties. Those rights are the rights to the authorized person’s own de facto and de jure actions, in other words, privileges (use rights) and powers (disposal rights).

Information Leakage, Imitation, and the Patent System

From a firm’s perspective two competing forces are driving the decision to invest in innovation. On the one hand, innovative performance is an important driver of profitability and growth. On the other hand, investments in innovation suffer from negative externalities, i.e. spillovers to other firms, and hence imitation could be induced. To preempt imitation firms may protect their inventions by means of intellectual property rights, such as patents. By taking out a patent, however, a firm also conveys information about the functioning of the invention to competitors. In this empirical paper, we highlight the trade-off of patenting by setting up a recursive system of equations on knowledge leakage and imitation that, among other factors, may be partly determined by firms’ patenting activity. Thereby we contribute to the debate on the functioning of the contemporary patent system. We find that patenting firms are being less confronted with imitation. The effect of patents on the dissemination of R&D findings is, however, insignificant. Therefore, we conclude that patent disclosures do not significantly harm the appropriability conditions for inventions, but help to protect, at least partly, against imitation, as it has been originally envisaged by policy.

Patents, Technical Standards and Standards-Setting Organizations: A Survey of the Empirical, Legal and Economics Literature

Despite their potential efficiency benefits, voluntary consensus standards have over the past decade become the subject of significant private litigation, regulatory enforcement and policy debate. Much of the controversy centers on the perceived proliferation of patents covering standardized technologies, potentially abusive enforcement of such patents against manufacturers and users of standardized products, and the terms on which patent holders may be required to license the use of those patents to others. This chapter offers a brief overview of the legal and economic literature concerning interoperability standards and standards-setting organizations, with a focus on empirical studies and contemporary patent and patent licensing concerns.

The Effect of Patent Length on Social Welfare: The Economics of Modifying Patent Life as a Policy Instrument

This paper will explore the contemporary applicability of an economic model of patents. It will proceed to then analyze the implications of the model’s findings on scholarly understanding of the contemporary patent system. The model views a patent as conferring a period of exclusivity during which the patentee can reap the producer surplus due to monopoly pricing. Upon expiration of the patent and thus the elimination of the deadweight loss characteristic of the patentee’s monopoly pricing during the term, the surplus becomes entirely the consumer’s. The model treats the problem as one of optimization, balancing the force of the patentee’s profit motive and desire to seek adequate recompense for its initial cash outlay to come up with the invention (i.e. a desire for a longer patent term), with the push of the government’s desire to reduce the deadweight loss and allow other market entrants (i.e. a shorter patent term). My updates to the model demonstrates that contemporary discount rates will not affect the basic findings that welfare is not too dependent on patent length. In addition, the findings still have policy-setting applicability in light of the existence of patent thickets. If the government were to aim to decrease thickets, then shortening patent life would be an effective tool, as overall societal welfare would be minimally impacted. The paper also demonstrates that shortening or tweaking patent life also has the ability to stem the effects of the activity of non-practicing entities (NPEs), commonly known as “patent trolls.”

Anticompetitive Patent Injunctions

The current approach for determining when courts should award injunctions in patent disputes involves a myopic focus on the hardships an injunction might impose on the litigants and the public. This article demonstrates, however, that courts sometimes could rely instead on a consideration far more relevant to the patent system's goal of promoting innovation: the extent to which the right to exclude was actually a necessary quid pro quo for the plaintiff's decision to bring its products to market. We illustrate the value of this approach with a critique of a recent Federal Circuit decision, Trebro Mfg. Inc. v. FireFly Equipment, LLC, which held that injunctive relief may be appropriate when a defendant infringes a patent that the plaintiff-competitor does not practice, and against which it lacked any legal protection when it entered the relevant downstream market. These circumstances — which are increasingly common in industries with rich markets for secondhand patents, result in the formation of what we refer to as a “diagonally integrated” nonpracticing entity (NPE) — a producer who owns a patent it does not practice, and who competes with downstream rivals who use (or would like to use) the patented technology. We develop a simple model showing that if such a firm acquired the unpracticed patent after entering the relevant product market, an injunction poses a threat to competition and consumer welfare that is not offset by any plausible benefit to innovation. Further, diagonally integrated NPEs have a perverse incentive to exclude or substantially limit all use of the patented technology, making them more likely to seek excessive licensing fees and aggressively seek injunctive relief than are conventional, “unintegrated” NPEs. This effort to foreclose all use of a technology is novel in the patent literature, but the spirit of this tactic is well known in antitrust: a dominant firm acquires patents that it has no intent to use simply in order to deny the technology to rivals, thus perpetuating its dominant position. The model’s implications also extend to a range of topics at the core of contemporary patent policy debates, including patent privateering, FRAND-encumbered patents, and preemptive patenting. It also suggests that in considering appropriate remedies the court should weigh competition concerns more seriously, particularly when there is little or no tradeoff with innovation concerns.

Rethinking Patent Eligibility for the Modern Scientific Age

As reflected in the Federal Circuit’s fractured opinion in CLS Bank v. Alice Corp., there is no greater confusion in contemporary patent law than that surrounding the scope of patent eligibility limitations. This Supreme Court amicus brief in that case traces the roots of the court-made doctrines excluding patents on laws of nature, physical phenomena, and abstract ideas. It argues that a test of inventive application neither serves the underlying purposes of the patent system nor comports with the process of modern technological advance. As a result of advances in scientific understanding and methods over the past 150 years, many if not most inventions today explicate, manipulate, and control physical, chemical, biological, and digital phenomena at elemental, molecular, algorithmic, and systemic levels. Doctrines that treat conventional application of even newly discovered computer algorithms, molecular pathways, and chemical synthesis as unpatentable threaten to exclude much of the inventive thrust of modern research. Mayo’s requirement for unconventional application shifts scientists’ efforts from the valuable scientific and technological advances that society seeks toward surmounting an amorphous test of non-obvious implementation. Specific and practical application, in conjunction with the technological arts limitation explicated in Justice Stevens’s concurrence in Bilski, would better serve as the test for patent eligibility in the modern scientific and technological age.Particularly in light of past experience, setting inventive application as the test for patent eligibility threatens to undermine invention incentives, hamper patent prosecution, and greatly complicate patent litigation. While recognizing that the problems posed by patents on software and other computer-implemented inventions are real, this brief contends that patent eligibility doctrines beyond requiring specific application and categorical exclusion of business methods and other non-technological processes are poorly suited to address those concerns. It therefore concludes that the Supreme Court should turn away from the Funk Brothers/Flook/Mayo paradigm, and instead focus on elucidating the statutory requirements of patentability. By clarifying the constitutional and jurisprudential foundation for subject matter exclusions, the Court can promote legislative and administrative solutions that more directly address the evolving needs of the patent system.

Building Patent Portfolios to Facilitate Cross-Licensing Agreements: Implications for Merger Efficiency Analysis

One important issue at the cross section of antitrust and patent law is the patent holdup problem, which arises when one party makes relationship-specific investments ex ante that incentivizes the other party to engage in opportunistic behavior ex post. Firms facing the potential for holdup can be expected to make investments aimed at minimizing this potential. Merger is an important, but thus far little-discussed, method by which firms can attempt to solve potential holdup problems. Merger internalizes the externalities that allow for patent holdup. By merging, two firms with relatively undeveloped patent portfolios may gain meaningfully increased bargaining power in licensing negotiations, which they may use to facilitate cross-licensing agreements — thereby decreasing transactions costs and reducing the risk of opportunistism. For purposes of antitrust analysis, courts, agencies, and economists have long recognized that significant efficiencies often derive from cross licensing, including increases in output arising from the diminished marginal costs of production. As the Google-Motorola acquisition exemplifies, merger may provide an important alternative solution to holdup problems, despite being largely overlooked in the contemporary patent holdup debate. This acquisition potentially provides Google with leverage and ownership rights to protect the entire Android ecosystem that cannot be accomplished by alternative contractual structures. Such a merger — which increases output that cannot be achieved by alternative structures — appears to satisfy the basic definition of a merger efficiency. Whether these benefits — which presumably would increase output — are cognizable efficiencies in merger analysis is thus an important question. Part I of this Article discusses the economics of patent portfolios and cross licensing, addressing both their procompetitive tendencies and their anticompetitive possibilities. Part II demonstrates that merging to build a patent portfolio, and thereby to induce cross licenses, is consistent with traditional economic rationales underlying the ownership-contract tradeoff. Part III examines the treatment of efficiencies within antitrust law, articulating and analyzing the Guidelines’ framework for evaluating proffered efficiencies. Part IV then investigates whether building patent portfolios in order to facilitate cross-licensing agreements — and accordingly to increase output — satisfies the requirements of this framework. Part V concludes.

Building Patent Portfolios to Facilitate Cross-Licensing Agreements: Implications for Merger Efficiency Analysis

The intersection of antitrust and patent law has increased in scope and importance over the past several decades. One important issue at this cross-section is the patent holdup problem, which arises when one party makes relationship-specific investments ex ante that incentivizes the other party to engage in opportunistic behavior ex post. Firms facing the potential for holdup can be expected to make investments aimed at minimizing this potential. Numerous methods of solving the holdup problem exist, including using ex ante auctions to identify and alleviate holdup problems, as well as patent reform. Merger is another important, but thus far little-discussed, method by which firms can attempt to solve potential holdup problems. Merger internalizes the externalities that allow for patent holdup. By merging, two firms with relatively undeveloped patent portfolios may gain meaningfully increased bargaining power in licensing negotiations, which they may use to facilitate cross-licensing agreements—thereby decreasing transactions costs and reducing the risk of opportunistism. For purposes of antitrust analysis, courts, agencies, and economists have long recognized that significant efficiencies often derive from cross licensing, including increases in output arising from the diminished marginal costs of production. As the Google-Motorola acquisition exemplifies, merger may provide an important alternative solution to holdup problems, despite being largely overlooked in the contemporary patent holdup debate. This acquisition potentially provides Google with leverage and ownership rights to protect the entire Android ecosystem that cannot be accomplished by alternative contractual structures. Such a merger—which increases output that cannot be achieved by alternative structures—appears to satisfy the basic definition of a merger efficiency. Whether these benefits—which presumably would increase output—are cognizable efficiencies in merger analysis is thus an important question.

Getting Into The ""Spirit"" Of Innovative Things: Looking to Complementary And Substitute Properties To Shape Patent Protection For Improvements

This Article both identifies and corrects a blind spot in the literature on optimal patent protection for improvements. Contemporary theories cannot explain why a set of easy cases - cases in which earlier inventors’ patent claims routinely do and should expand over time to encompass later-developed improvements - are easy cases. To explain these cases, patent theory must identify the inventions of earlier and later inventors in a different manner. Today, inventions are viewed simply as innovative things or sets of innovative things. This Article demonstrates that the locus of invention must be identified in a finer-grained manner: the inventions of the successive inventors in an improvement scenario must be identified as the particular properties of innovative things that make them innovative. Identifying innovative properties as the locus of invention has two principal benefits. First, it reduces the explanatory gap between the economic theory on patent protection for improvements and the uncontroversial reality of the contemporary patent regime. It reliably distinguishes the easy cases from the difficult ones, and it explains why the cases are either easy or difficult. Second, it allows the economic concepts of complements and substitutes to be brought to bear on the crafting of optimal claim scope - a task that these concepts have not previously been thought suitable to perform. The easy cases are cases in which the innovative properties of subsequent inventors are pure complements, and the difficult cases are cases in which the innovative properties of subsequent inventors are complement-substitute mixtures.

Merges: Back to the Shadows, or Onward and Upward? Current Trends in Patent Law

This blog posting addresses two primary concerns: (1) that the U.S. Supreme Court has taken an anti-patent turn in its recent decisions; and (2) emerging tensions between two key industry sectors with large stakes in the patent system, pharmaceutical/biotechnology and electronics/software. On the first point, I argue that the target of recent Supreme Court decisions is the Federal Circuit, and not patents or patent law. In particular I defend the eBay decision, and discuss the first wave of post-eBay cases, which I believe demonstrate a moderate and reasonable application of equitable principles to contemporary patent cases. As to the second point, I concur that there is a divergence of interests between pharma/biotech and electronics/software, but argue that it is essential to accommodate both sets of industries in one big patent tent. This will require skillful compromise, legislatively and through the common law process, but it can and should be done.]

Tacit knowledge in patent applications: observations on the value of models to early US Patent Office practice and potential implications for the 21st century

Scientist-philosopher Michael Polanyi has observed that tacit knowledge––knowledge that we know but cannot tell––is an essential part of scientific genius and the ability to innovate. He also observes that physical embodiments, particularly in combination with other means of communicating, provide one important means for transmitting tacit knowledge about an invention. Early in the history of the US Patent Office, a patent application to that Office reflected the need to capture unarticulated aspects of an invention: the application included models as well as text and diagrams. Used in disputes about the content and nature of an invention, models were a vital means for communicating about inventions to the public. This article considers the historical relationship among the various types of “texts”––drawings, texts, and models––that were once required for patent applications. It describes Patent Office arguments for and against eliminating models as evidence of invention, and concludes by raising questions about the potential value of computer models to contemporary patent activity.

In Defense of Geographic Disparity

One of the most controversial issues in contemporary patent law relates to biopiracy, which concerns the exploitation of indigenous traditional knowledge by Western firms without justly compensating the keepers of the knowledge. A high profile example is the neem tree controversy. The leaves and bark of the neem tree, which is indigenous to India, have been used as natural pesticides and fuel by the people of India for years. In the early 1990s, the multinational company, W.R. Grace, obtained United States and European patents on pesticide products derived from the neem tree. The European patents were invalidated, but the validity of the American patents remained intact. The reason for this difference in result is that unlike European patent law, the United States patent code distinguishes between prior knowledge and use in foreign countries and prior knowledge and use in the United States. That is, American patent law, particularly 35 U.S.C. section 102, does not recognize as prior art foreign knowledge and use, such as that which was involved in the neem case. This geographic disparity has been the subject of much criticism, most recently by Professor Margo Bagley of Emory University School of Law. In her well-written article, Professor Bagley contends that section 102's geographic limitation is unconstitutional and bad policy. This essay challenges these assertions. By advocating the elimination of the geographic disparity and thereby allowing foreign knowledge and use to serve as prior art, Professor Bagley seeks to protect developing nations and indigenous peoples from patent rights. In contrast, I argue for an offensive approach whereby patent rights serve to not only induce the commercialization of products derived from traditional knowledge, but also to compensate the keepers of traditional knowledge while respecting the need to conserve the host country's biodiversity. In this regard, the geographic distinction in American patent law is crucial. Novelty is a sine qua non of patent protection, but I believe Professor Bagley's conception of the domain is too broad and does not fully take into account the utilitarian nature of American patent law. While it is true that the Framers drafted the IP clause in the shadow of abusive monopolistic practices, the driving force behind the clause was the enhancement of public welfare. The geographic distinction is consistent with the IP clause because the distinction provides an incentive to invest in and commercialize products derived from traditional knowledge: products that otherwise would most likely remain undeveloped or out of reach for a vast majority of potential beneficiaries. In other words, the prospect of a patent allows for the dissemination of and access to products based on indigenous knowledge in a manner that benefits many more people than would otherwise have benefited. And it is this result the Framers sought to promote. Professor Bagley and I found common ground when she argues that indigenous peoples receive no benefit or compensation from the exploitation of their traditional knowledge. This is the most pronounced concern, but the problem here is not the availability of patent protection as much as it is the lack of an adequate compensatory mechanism for developing nations and indigenous peoples. Safeguards must be put in place so as to prevent biopiracy. The availability of patent protection must be accompanied by consent, an equitable compensatory structure, and a commitment to conserve the host nation's biodiversity. The remuneration, properly channeled, can be invested in research and development, healthcare, conservation, or general infrastructure. While not without problems, this approach compares favorably to a scheme that seeks to protect indigenous peoples from patent rights by rendering patent protection unavailable for products derived from traditional knowledge.

Random Walks, Non-Cooperative Games, and the Complex Mathematics of Patent Pricing

Current patent valuation methods have been described charitably as inappropriate, short-sighted, inherently unreliable, and a guestimate. This article provides a more rational and systematic tool than any found in the existing literature. We explain how patents are like stock options and demonstrate how the Black-Scholes equation for pricing real options can be applied to price patents. First, we explain the major difficulties inherent in applying the standard equation to patents and then proceed to demonstrate how it can be adapted to overcome those problems. In particular, the Denton Variation of Black-Scholes begins with fine distinctions in identifying the source of value, followed by a systematic analysis of factors, especially market forces, that influence variance and its sources over time. We show that the point-price paradigm relied upon by patent valuations to date has been flawed. Here, we leave the world of contemporary patent valuation behind. We claim that solving a single Black-Scholes equation is grossly inadequate for a risky, long-lived, infrequently traded item such as a patent. For a patent, the present value exists as a distribution curve with variously weighted probabilities, thus the apparent precision in picking a starting value by traditional patent valuation methods is illusory. The Denton Variation eliminates two historic shortcomings of the parent equation by providing a precise way to factor in transactions costs, and by quantifying the impact of the option cost on the profitability of the transaction. Moreover, the expression can accommodate a variety of patent profitability situations. For the purposes of illustration, we run through the equation to value a hypothetical patent. We also take the time to explain how insights provided by game theory help justify the choices that underlie the Denton adaptation of the Black-Scholes equation. In the patent licensing context, considerations of the effect of bargaining position are unavoidable, and we show how our assumptions are consistent game theoretical paradigms. In conclusion, we explore the implications of our refined approach to patent valuation. We examine, therefore, how patent valuation problems currently hinder efficient transfer of technology and how our enhanced version of the new Black-Scholes variant equation fits comfortably into the calculation of the reasonable royalty remedy applicable in cases of patent infringement when the patent owner cannot prove lost profits.

Révolution technologique, mondialisation et droit des brevets

The patent system is complex and can only be really understood from an interdisciplinary standpoint. The article’s objective is modest – to provide some far from exhaustive comments on the law on contemporary patents without going into too much technological detail. Intellectual creation is not fundamentally prone to appropriation: though it can easily be copied or reproduced. Its protection and hence private appropriation come under secrecy (whenever possible) or the law. Companies have become the focus of interest for intellectual property systems in general and patents in particular. The most important changes to the patent system over several decades were made to systematically strengthen the patent-holder’s rights whilst lessening the responsibilities and constraints imposed upon him. We can thus legitimately address the question of whether the general interest is really being served. We will be making some comments upon matters which have characterised the current evolution of patent law. Firstly, there is the globalisation of this law. Then we will discuss the evolution of the criteria for patentability of inventions. In this context, we will tackle the problems raised by « new areas of protection » such as living matter – biotechnology in particular, software and financial and commercial systems. Then we will examine related issues and then attempt to air some more general reflections inspired by this examination. This study of contemporary patent law will be made in the light of various longstanding preoccupations fundamental to patent law: such as the encouragement of innovation and the sharing of knowledge whilst at the same time respecting a balance between interested parties and public interest. Previously, intellectual property was tolerated in international trade as a private monopoly, now it is perceived by the companies controlling the major part of technology as the guarantor of this trade. Hence the patent has moved on from an obstacle to competition to the status of an instrument against competitors and worldwide competition. The new function assigned to patents does not place as much importance on the responsibilities of the holder, specifically the requirement for industrial exploitation, but requires on the other hand a strengthening of the patentee’s rights at world level. Briefly, the contemporary evolution of patents has led to protection being widened, requirements weakened and rights strengthened. All members of the World Trade Organisation are obliged to adopt legislation highly protective of intellectual property and in particular inventions to eliminate the possibility of the legal imitation long time in operation in most countries during some stage of their industrial development. What will be the consequences for the development of domestic industries in a large number of countries included the developed ones. Clearly it is too early to say but we can address the question of whether we are not moving towards an increasing dualisation of the world economy : with on one side the few innovating countries where large multinationals are concentrated providing the majority of innovations and hence holding keys to scientific and technical progress and on the other the mass of countries – developed included – with little innovative capacity, no longer able to imitate to learn how to innovate because they are threatened with serious sanctions by the TRIPS agreement. Beyond the question of whether the current patent system is a determining factor of higher American than European competitivity and whether the patent system and in particular patent holder rights need to be strengthened to foster innovation in our own countries, a more fundamental issue which needs to be addressed in Europe is whether we need to systematically follow the United States in its rush to patent with the risk of losing our European « soul» or do we necessarily have to develop a humanist European model aiming at a balance between economic, social and ethical considerations. It should also be pointed out that a distinction should be made between the patent system and the rules governing it and its operation.

Patent Law in the Age of the Invisible Supreme Court

This article examines the permanence of the U.S. Supreme Court's retreat to the peripheries of patent law after the creation of the Federal Circuit, and explores the roles that the Supreme Court might imagine for itself in contemporary patent law. For discussion purposes, the article describes two hypothetical models for Supreme Court decisionmaking in patent cases: an aggressive interventionist model and an extreme non-interventionist model. After considering the shortcomings of both models, the article proposes an intermediate, managerial model. The managerial model rejects the proposition that the Court should intervene in patent cases to correct perceived substantive errors in Federal Circuit decisions. Instead, the model encourages the Court to manage disputes over the appropriate allocation of power among institutions of the patent system. Accordingly, the Court should intervene in patent cases that present such issues, and should direct its opinions towards resolving such issues, leaving the elaboration of detailed substantive patent doctrine to the Federal Circuit.