Denying patent holders extensive control over experimental use of their technologies has been widely lauded as an essential facilitative component of the innovative process, one that is to be enthusiastically embraced and expanded. If one posits the cumulative nature of innovation, the possibility of irrational holdout, and the view that patents are awarded in return for the disclosure of valuable information, widespread support for an expansive construction of the doctrine is unsurprising. The position flows naturally from a liability-based conception of intellectual property.
Yet the Federal Circuit has taken a position diametrically opposed to the majority view, limiting the experimental use doctrine to a degree that essentially renders it inoperable. This Article considers the normative foundation of the Federal Circuit's restriction and, in contrast with the prevailing academic view, concludes that it is entirely desirable. Bestowing patent holders with exclusive rights over experimental use facilitates Coasian bargaining in what is likely to be a low transaction costs environment and, more important still, is likely to enhance dynamic efficiency. Scholarship expressing a contrary view tends to place unwarranted focus on an "incentive to disclose" theory of patent rights, a theory which this Article demonstrates is neither plausible nor justified.
To the extent that considerations such as information asymmetry, transaction costs, irrationality, and bargain failure provide conceivable grounds for imposing compulsory licenses in other contexts, they have limited applicability with regard to experimental use. To import unthinkingly such considerations from other contexts is to overlook the crucial facilitative mechanisms likely to be associated with a strong property rights regime. Even horizontal competitors, who may understandably be very hesitant to license technology to each other, may nevertheless reach an agreement through reciprocal licensing deals, patent pools, grant-back provisions, or simply a sufficiently high fee. The oft-cited prospect of "irrational" holdout is overstated and, to the extent it exists, is most likely simply a reflection of a proffered licensing fee that undercompensates the patentee. Recognizing the right to exclude that lies at the heart of the patent grant fuels the sole incentive that truly matters, namely, the incentive to innovate.
The folly of the expansive view of experimental use is magnified when one considers the substance of the right it advocates. Its proponents counsel a regime of zero compensation, a price recognized by economists as necessarily inefficient. Some scholars' assertion that a zero-compensation regime will have negligible impact on patentees' "incentive to invent" is unsupportable.
I. FRAMING THE ISSUE IN CONTEXT
A. A Brief Overview of the Law
B. The Property Rights Movement and the
1. Utilitarianism as the Exclusive
Foundation for Intellectual Property
2. Informing the Consequentialist
II. RESTRICTING EXPERIMENTAL USE
A. Patent Policy as an "Incentive to Disclose"
B. Employing the Exemption to Avoid
Harm to Ex Ante Incentives
C. The Critical Importance of
D. The Optimal Exemption
The degree to which information should be subject to private ownership poses one of the most hotly contested questions in contemporary academic discourse. (1) This Article covers a subset of the larger debate, considering the question of whether a patentee's right to exclude includes the authority to prevent others from experimenting on, or with, his invention. In doing so, it considers Judge Newman's argument that "[t]he right to conduct research to achieve ... knowledge need not, and should not, await expiration of the patent." (2) In contrast to prevailing academic opinion, the Article concludes, no such general right should exist. …