Author(s)
Source
Mimeo, August 2008
Summary
This paper looks at how patent law affects inventors’ rewards.
Policy Relevance
Courts can affect innovation by determining if patents are more broad or more narrow.
Main Points
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Some argue that courts should make it easier to show that patents are obvious and invalid, because patents can interfere with other inventors.
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Courts can limit patents getting in the way of other inventors by deciding how broad that patent is, and this can be more important than obviousness. If a patent is very broad, many firms working in that area will require a license from the patent owner.
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Inventors build on others’ ideas (innovation is cumulative). Adjusting how courts see breadth and obviousness determines if follow-on inventions are patentable or not, and whether follow-on inventions infringe the earlier patent.
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In the Semiconductor Chip Protection Act only a large advance is protected and noninfringing, and any smaller advance is infringing and not protected.
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Generally, a new product replaces an original when it is patentable and noninfringing. Licensing is important to avoid infringement, because both inventors profit.
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When patents are hard to get and narrow, firms might invest more in big innovations to get a patent, but firms might use trade secrets more.
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Trade secrets make competition and follow-in inventions hard because inventions are not made public. Firms opting for trade secrets can limit the benefits that would come from reforming the patent system.
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If patents on an early idea are easy to get and broad, consumers tend to pay higher prices, and firms will waste money racing to win the first patent.
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When patents are easy to get and narrow, large advances will be patentable and noninfringing, which encourages firms to invest in significant innovation.