Is Patent Enforcement Efficient?

By Lemley, Mark A.; Feldman, Robin | Boston University Law Review, March 2018 | Go to article overview

Is Patent Enforcement Efficient?


Lemley, Mark A., Feldman, Robin, Boston University Law Review


Introduction

Of the many governmental activities we undertake in this country, few are as purely and explicitly utilitarian as the patent system.1 The patent system exists to bring about a particular result, rather than out of a sense of an inventor's moral rights or as a matter of equity.2 From the many commercial activities that might otherwise be open to anyone, we remove some, for a limited period of time, in the hope that dedicating them to the province of a few will redound to the benefit of us all.3 The benefit-in other words, what the patent system is designed to promote-is commonly referred to as "innovation."

The traditional utilitarian story supporting the patent system is that the lure of patent rights encourages invention that would not otherwise occur, or at least would occur later but for the patent.4 The invention the system is designed to promote is not what is known in science as "basic research," such as an understanding of how nature works or what forces propel the universe. After all, for more than a century, the courts have reminded us that the proper subject matter of a patent does not include laws of nature, natural phenomena, or abstract ideas-no matter how valuable and essential to the progress of science these may be.5 Rather, the patent system is aimed at protecting "applied" inventions-or innovations-that are deployed in the world. Only when broad and basic principles are reduced to a particular practice and applied in a specific endeavor will they be eligible for protection.6

The patent system's focus is consistent with economic literature, which distinguishes invention-an idea-from innovation-turning an idea into a viable product. The patent system encourages not just invention in the abstract, but the creation of new products. This is the "[p]rogress" of the "useful [a]rts" mentioned in the Patent Clause of the Constitution.7

The focus on innovation, not simply invention, is particularly important with the emergence of the modern non-practicing entity ("NPE") business model. Colloquially known as "patent trolls," NPEs are those entities whose core activity involves licensing or litigating patents, as opposed to making products.8 By all accounts, the modern NPE business model has expanded rapidly over the last two decades, an expansion that is particularly evident in the context of litigation.9 Different scholars slice the numbers differently. For example, some exclude NPEs organized as trusts as well as individual inventors and others exclude "failed startups."10 When the broader definition is applied, however, the data are remarkably consistent across studies, with all showing that NPEs now account for the majority of patent lawsuits filed in the United States.11

Our goal in this Essay is to assess whether lawsuits filed by NPEs are efficient. By "efficient," we do not mean "are the lawyers working as quickly and cheaply as they could?" Rather, our goal is to determine under what circumstances the enforcement of patent rights might benefit society. As we demonstrate, while there are various ways patent enforcement might serve utilitarian ends, those approaches all involve some sort of technology transfer from the inventor to implementers or the public at large. Without that technology transfer, patent enforcement represents a pure cost to society and a tax on innovation. Unfortunately, a large fraction of the patent lawsuits filed today fall in the category of pure costs to society.

I. Innovation-Related Justifications for NPEs

Consistent with the utilitarian goals of the patent system, all of the arguments suggesting NPEs benefit society rest on their contribution, either directly or indirectly, to the creation of products somewhere in the system. NPEs, unlike practicing entities, do not deploy the technology in the world themselves, but that doesn't answer the question of whether they contribute to innovation and the creation of new products. To promote innovation they must not only invent, but that invention must lead to the creation of products by someone, somewhere in the system, at some point. …

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