Orphan Business Models: Toward a New Form of Intellectual Property

Article excerpt

CONTENTS

I.    RESPONSES WITHIN PATENT LAW: BUSINESS METHODS AND         1371
      RELATED DOCTRINES

      A. Market Experimentation After Bilski                    1373

         1. Abstractness and Suitability for Experimentation    1373

         2. Other Patent Doctrines                              1378

      B. Problems with Incorporating Market Experimentation     1379
         Concerns

II.   SUBJECT-SPECIFIC RESPONSES: THE CASE OF                   1381
      PHARMACEUTICALS

      A. Statutory Regimes                                      1383

         1. Orphan Drug Act                                     1384

         2. Protection from Generic Competition                 1388

         3. Encouragement of Generic Competition                1389

      B. Potential Reform Paths                                 1392

         1. Longer Protection Term                              1392

         2. Ceilings on Exclusivity Based on Inputs or Success  1393


         3. Administrative Discretion                           1395

III.  NEW APPROACHES TO INTELLECTUAL PROPERTY PROTECTION
      FOR

      ORPHAN BUSINESS MODELS                                    1396

      A. Term Competition                                       1396

         1. The General Mechanism                               1396

         2. The Unconventionality of the Mechanism              1400

         3. Extensions                                          1401

           (a) Nonappropriable Network Effects                  1402

           (b) Long Time Horizons                               1404

           (c) Deregulation and Reregulation Incentives         1405

           (d) Industry-Specific Statutory Compromises          1406

      B. A Bonding Mechanism                                    1408

         1. First Step Scenario: A Bonding Mechanism            1409

         2. Potential Improvements to the Bonding Mechanism.    1415

         3. Further Applications: Beyond Conventional Business  1416
            Models

            (a) Scientific Research                             1417

            (b) Legal Innovation                                1419

IV.   CONCLUSION                                                1421

Harold Demsetz famously observed that property rights will tend to emerge when the value from recognizing them is sufficiently great to make their transaction costs bearable. (1) Demsetz's theory is descriptive, (2) but when the tradeoffs inherent in particular property rights are nearly in balance, normative debate about the desirability of those rights is likely to be lively. (3) The business method patents controversy underlying the Supreme Court's decision in Bilski v. Kappos (4) might thus be seen as an epiphenomenon of the broader sweep of Demsetzian institutional evolution. The immediate policy question is whether the costs inherent in a regime of patents on business methods (including patents on business models) (5) outweigh the benefits. (6) Over the long run, (7) however, if Demsetz's core insight is correct, we should expect evolving legal institutions to find some means of protecting business methods at least in those cases where such protection is most critical and can be accomplished most cheaply.

The form of protection that ultimately emerges, however, might be quite different from patent protection for business methods as under-stood today. Perhaps the Patent and Trademark Office (PTO) and courts will develop more effective doctrines for avoiding issuing un-necessary patents--for example by toughening the nonobviousness test. (8) At least as importantly, the subject matter of business method protection--not necessarily business method patent protection--could change. Business method patents protect ideas for new business methods (9) because of the longstanding rule that inventions need not be reduced to practice (10) or commercialized (11) to be entitled to patent protection. …