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Abstract:
(Note: this is a substantially revised version of Harvard Olin Working Paper No. 415 of May 2003, SSRN Abstract ID No. 392202 (http://ssrn.com/abstract=392202) and includes more detailed discussion of issues including the DOE, willfulness and the Knorr decision, and the FTC Report on patents and antitrust.)

Critics of the patent system suggest the rules for determining patentability should be stricter, subjecting patents to more scrutiny during Patent Office examination. This Article offers a counterintuitive model system under which patent applications are registered, not examined, to elucidate a new normative view that sees present positive law rules for obtaining patents as primarily operating to minimize social cost, and that accounts for otherwise puzzling aspects of the patent system. This registration theory for patent-obtaining rules is a companion to the commercialization theory for patent-enforcing rules by the same author. This Article shows how these theories together offer a more coherent view of the patent system than the reward, prospect, and rent dissipation theories. This Article further identifies those patentability rules that are essential and those that should be reformed, while revealing inherent registration aspects of our present system and reasons for eschewing reforms presented elsewhere.

Intellectual Property, Antitrust, Patent, Trademark, Property, Innovation, Invention, Law and Economics, Litigation, Registration, Examination, SEC

Abstract:
The legal rules for determining whether an inventor is entitled to a patent are presently enforced in the first instance by the Patent Office through ex parte examination of patent applications. Critics of various aspects of the patent system suggest that these rules should be ratcheted up in some way, subjecting patents to more scrutiny during Patent Office examination. Departing from existing literature, this paper offers a hypothetical model system under which patent applications are merely registered, not examined, to show how hard look approaches like examination increase social costs over soft look approaches like registration. The paper presents a new normative view of present positive law rules for obtaining patents that sees these rules as primarily operating to minimize social cost, and accounts for otherwise puzzling aspects of the patent system. This "registration" theory for the patent-obtaining rules is a companion to the "commercialization" theory for the patent-enforcing rules presented in prior work by the same author and these together are shown to offer a more coherent view of the patent system than other theories in the literature, such as the so-called "prospect" and "rent dissipation" theories. Far from defending the status quo of the present system, the registration theory identifies those rules that are essential and those that should be reformed. The registration theory reveals inherent registration aspects of our present system; and elucidates reasons for eschewing reforms presented elsewhere in the literature and adopting those presented here.

patent, patent registration

Abstract:
Contemporary debates over intellectual property ("IP") generally evidence positions that appear to line up at opposite ends of the same axis, with one side arguing for more rights for IP owners under each major regime - patent, trademark, and copyright - and the other side arguing for fewer. Approaching from what some may see as a "more" IP view, this paper offers the counterintuitive suggestion to consider abolishing one of these IP regimes - copyright, at least with respect to the entertainment industry, which represents one of that regime's most commercially significant users. This realization is in fact consistent with the underlying view because the view is not accurately seen as even being directed to the "more" or "less" debate; and instead is focused on means as much as ends. In keeping with this means-directed approach, the paper provides the first comprehensive analysis of IP regimes using the set of tools from the field of new institutional economics. In so doing the paper offers the first normative case for IP that connects the path breaking literature on the theory of property rights generally with the seminal theories of the firm, transaction costs, and agency costs. Underlying this paper's stark departure from both the "more" and "less" bodies of the IP literature is the realization that the institutional structure of the present copyright regime may make the social costs of the present copyright regime too high, for at least the entertainment industry, while at the same time preventing it from providing the coordination benefits an IP regime normatively should provide. Building on this, the paper begins to explore for the first time whether the recent patent and trademark regimes have institutional structures that may allow them to provide these coordination benefits better, and with lower social costs. The paper thereby suggests how the patent and trademark regimes of yesterday may obsolete the copyright system of today.

Patent, Trademark, Copyright, New Institutional Economics, Innovation, Invention, Property, Antitrust

Abstract:
Controversies often arise at the interfaces where intellectual property ("IP") law meets other topics in law and economics, such as property law, contract law, and antitrust law. Participants in the debates over how to mediate these interfaces often view each interface as a special case deserving unique treatment under the law. The doctrines of copyright and patent misuse are cases in point: they graft select antitrust principles onto copyright or patent law, even though there is an entirely distinct body of law - antitrust law - designed to deal with the putative concerns about competition that allegedly give rise to misuse. In this essay, we argue that a better approach for mediating disputes at the periphery of IP law focuses on what we term the "basics" - or core principles and features - of each area of law, and rarely requires specialized frameworks. For example, according to our "basics matter" approach, there is no need to create special doctrines or approaches to address issues relating to matters such as price discrimination or restrictive licensing arrangements involving IP. Rather, analyzing the legality of such arrangements simply requires one to look to the basics of substantive IP law, antitrust law, and what some people call the "general law" - property law, contract law, and the like. Applying the basics of each area of the law gives us a workable - and more predictable - framework of analysis than creating one - with more specialized approaches, such as the doctrines of copyright or patent misuse, using the basics results in easier to apply rules for resolving disputes that transacting parties can better understand and rely on in advance. By reducing legal uncertainty, the "basics matter" approach facilitates the ex ante coordination necessary to promote innovation through the commercialization of the inventions, symbols, and creative works that are protected by patents, copyrights, and trademarks - the entire goal of IP law and an important goal of antitrust law.

Intellectual property, antitrust, patent, trademark, copyright, property, contract, innovation, invention, law and economics, misuse

Abstract:
Several recent commentators have criticized trends in the patent system by suggesting that the goals of the system can be better achieved through a variety of approaches that avoid or mitigate the monopoly-type impact of property rights. Suggested alternatives include the use of cash rewards, buy-outs, and liability rules, as distinct from property rules. This paper uses the important contributions made by these commentators to reveal shortcomings in any view of the patent system that focuses only on incentives to engage in inventive activity. The paper offers a new view of the patent system that embraces property rights and property rules as core elements of the patent system. According to this view, property treatment is essential for the subsequent commercialization activity that is necessary to get embodiments of nascent inventions into the hands of consumers and for efficiently identifying which inventions are worth the costs of government intervention in the first instance. The recently suggested alternatives fail to address these important goals of the patent system and would actually frustrate them. In addition, the current system already addresses many of the concerns raised by such commentary. The paper reveals how property rights and commercialization motivated the creation of our current patent system and explains many controversial trends in the system, including those that sparked the recent critical commentary, as well as those in other intellectual property regimes such as trademarks.

Abstract:
Arti Rai's article in the Fall 1999 issue of the Northwestern University Law Review explores the proper use of both legal rules and prescriptive norms to shape behavior in the basic biological research community. Rai's article builds upon the extensive work in this area by Rebecca Eisenberg, which first attained prominence through Eisenberg's article in the December 1987 issue of the Yale Law Journal. Eisenberg concludes that the use of patents in the area of basic biological research may frustrate central norms of the community. Rai prescribes concerted public and private action as the best tools for avoiding patents and the problems Eisenberg attributes to them. This essay responds to patent critics like Rai and Eisenberg by showing how patents are essential for promoting the central norms of the basic biological research community.

Abstract:
Corporate control is the central concern of corporate law, and, in addition to priority, has become a core concern of bankruptcy. The question of corporate control in bankruptcy is especially important for intellectual property ("IP") rights. Bankruptcy proceedings do not compromise fundamentally the value of most tangible assets. Tangible assets generally retain their value both during and after bankruptcy proceedings, although there is always the risk that the business will be run poorly. IP is different. IP rights are typically most valuable when they carry a credible threat of injunction. As a result, to the extent the delay and coordination problems of bankruptcy lead to the under-enforcement of a debtor's IP rights - or simply to the impression of under-enforcement - bankruptcy can frustrate the important coordination benefits IP rights otherwise serve. The bankruptcy process itself potentially can erode the private value of IP to a firm and all of its constituencies, as well as the public value of IP in facilitating downstream commercialization of the subject matter IP otherwise protects. To ensure that a debtor's IP rights are enforced vigorously in bankruptcy, a party with the right incentives, information, and resources, as well as with standing to sue, must have control over IP assets in bankruptcy.

A prepackaged bankruptcy or an assignment of a debtor's IP assets for the benefit of its creditors might mitigate the delay and coordination problems of bankruptcy. Borrowing from structured finance, we explore a different option: the creation of a bankruptcy-remote special purpose entity ("SPE") to which a company transfers all or part of its IP assets to ensure that the assets do not become part of the company's bankruptcy estate when and if the company is ever in bankruptcy. A properly structured "IP SPE" would have the critical attribute that a holder of IP must have to ensure the value of the IP: the credible perception by all market players that the SPE can enjoin infringers of, as well as transact over, the IP. The sort of "IP securitization" that we outline is very similar in structure to a traditional asset securitization.

One of the principal normative criticisms of the IP securitization structure, as we propose it, is that the structure might accelerate what some might see as the death of legal liability by removing assets from the reach of a debtor's creditors in bankruptcy. Accordingly, in addition to outlining the IP securitization structure, this Essay briefly explores how the death of legal liability may be exaggerated and how concerns over the death of legal liability may be overstated. More to the point, in some instances, IP securitization may best ensure the value of IP assets to the benefit of a debtor's creditors and other constituencies.

Intellectual Property, Corporate Control, Bankruptcy, Property

Abstract:
Asked by conference organizers to consider the impact of the Supreme Court on intellectual property this millennium, this essay offers the view that the Supreme Court's intellectual property decisions by its present members generally are premised upon what may be viewed as contrived conflicts among bodies of law. Proceeding from this faulty foundation, the Court's efforts to resolve those conflicts subsequently have generated bodies of judge-made law that frustrate in important ways the basic statutory framework of intellectual property law. Examples of cases employing this problematic approach include Bonito Boats, Dastar, Warner-Jenkinson, Festo, TrafFix, and Holmes. Avoiding the contrivances not only would have left intact congressional action that the Court has not held to have been improper in its own right, but it also would have better promoted the normative goals these regimes were designed to achieve. Far from suggesting any particular business outcome in any of these cases, the essay proceeds from a comparative institutional analysis to show how decisional frameworks different from the ones the Court used would better achieve the basic goals and institutions of the particular statutory regimes of intellectual property law at issue in these cases.

Intellectual Property, IP, Patent, Trademark, Copyright, Supreme Court

Abstract:
All too often within organizations and communities, innovations are not generated or put to use as rapidly or as broadly as they could be. Chief targets for blame include the problems of transaction costs, agency costs, lack of coordination, and improper incentives. Borrowing from the rich literature in the field generally known as new institutional economics, which has studied these types of problems more broadly, this Article elucidates how some practical tools might be expected to mitigate such problems. Particular arrangements of formal law and informal practice may help reach across the "valley of death" between early stage technologies and their downstream commercial deployment. Depending on the circumstances of a given situation, different practices and different aspects of the legal regimes of intellectual property, antitrust, business associations, bankruptcy, property, and contract may prove most helpful. Elucidating at least as many questions for further empirical research as answers in the form of practical tips for structuring transactions, this Article focuses on the particular mechanisms by which the problems and proposed solutions might actually operate.

Intellectual Property, innovation, transactions

Abstract:
This essay, written for the National Association of Environmental Law Societies' (NAELS) annual meeting, explains how patent law operates generally with an emphasis on how it may impact the environment in particular. In so doing, the essay addresses from a patent perspective some representative concerns relating to patents that appear to be prevalent in the environmental literature and shows how the patent system may provide substantial benefit for those favoring the environment.

Patent, Environment, Intellectual Property, Biodiversity

Abstract:
Countless high profile cases like the recent patent litigation threatening to shut down the BlackBerry® service have long drawn sharp criticism; and in response, most of the intellectual property (IP) literature argues for the use of weaker, or liability rule, enforcement as a tool for solving the problems of anticompetitive effects and downstream access while still providing sufficient rewards to IP creators. This paper takes an unconventional approach under which rewards don't matter much, but coordination does matter a great deal. The paper shows how stronger, or property rule, enforcement facilitates the good type of coordination that increases competition and access. The paper further shows how, paradoxically, the reforms urged by IP critics end up facilitating the different, bad type of coordination that decreases competition and access. Simply put, the paper shows how policy debates would be radically improved by consideration of these two different coordination effects.

The paper follows the general approach of the field called New Institutional Economics ("NIE"), which has explored many problems that are triggered by different institutions of laws and norms. Because no institution is perfect, the NIE approach suggests that our choices among institutions must be informed by our views of the solutions we most want and the problems we can best mitigate or bear.

The paper explores a theory of the institution of property rights backed up by property rules as playing a particular, good role in facilitating coordination among many diverse complementary users of an asset in a way that increases competition and access. Under this view, coordination is offered as an alternative to other goals that have been suggested including internalizing externalities, mitigating rent dissipation, or providing direct incentives, and property is offered as an alternative to other institutions or organizations that also can facilitate this coordination goal, including, norm communities such as open source projects, firms, and government. The paper also shows how property rights backed up by weaker, or liability rule, enforcement can play a particular, bad role in facilitating the kind of coordination among large, established players that decreases competition and access.

The shift in focus towards the link between property rule treatment and coordination has several practical effects. First, it explains why many of reform proposals of yesterday and today that do not use the coordination approach should be expected to exacerbate the two key persistent problems of anticompetitive effect and reduced downstream access. Second, it explains why certain aspects of IP regimes may be working well and why others may be candidates for change or elimination. Third, it elucidates factors that cut against changing IP regimes in ways that likely will exacerbate the two key persistent problems of anticompetitive effect and reduced downstream access. Providing one example of how the coordination approach could inform practical policy discussions, the paper frames a discussion for evaluating a case against the present copyright regime.

patent, trademark, copyright, intellectual property, innovation, property, new institutional economics, coordination

Abstract:
The problems of the intellectual property ("IP") anticommons are infamous. Many people fear that the potential for vast numbers of IP rights to cover a single good or service will prevent an enterprise from even attempting to launch a business for fear of being unduly taxed or retarded or simply held up. This Article offers a solution based on private ordering within the context of existing laws. This approach uses a limited liability entity structured so that IP owners are given an actual stake in the operating business and thus an incentive to participate in the enterprise; and yet at the same time, the IP owners face a number of constraints that mitigate their interest in acting opportunistically by holding out. Through careful attention to IP owner payoffs and self-restraint, the proposed structure is designed to coordinate behavior among relevant IP owners, thus overcoming the anticommons problem. This approach is designed to help lawyers serve their role as transaction cost engineers who can structure relationships in ways that get deals done.

Intellectual Property, Anticommons, Patent

Abstract:
This Essay surveys recent developments across the fields of finance and innovation to highlight some common themes concerning the importance of property rights to economic success. Society regularly makes choices when shaping the precise contours of the legal institutions that govern the behavior of market actors, often in response to high profile issues like the collapse of Enron and the patenting of life-saving AIDS drugs. Recognizing that no set of legal institutions or related enforcement mechanisms will be perfect, this Essay explores some particularly helpful institutional features based on property rights that too often are overlooked by policy makers and commentators, even though these property-based institutional features have long been associated with economic success in a number of diverse settings.

Abstract:
The Supreme Court's unanimous decision in Quanta v. LG Electronics may make it significantly more difficult to structure transactions involving patents. While this decision does make a group of players into winners in the immediate term for existing patent deals (this group includes any customer who, like Quanta, buys patented parts without buying a patent license), almost everyone is likely to come out a loser going forward.

The Court in Quanta decided that a patent license that LG Electronics sold only to Intel - and explicitly limited to exclude Intel's customers, like Quanta, and priced to reflect these modest ambitions - would be treated by the Court as extending permission under the patent to those Intel customers. The legal "hook" on which the Court hung its decision is the patent law doctrine called "first sale" or "exhaustion."

The Quanta decision is likely to have a serious negative effect on the nuts and bolts of patent licensing agreements. On one reading, it stands for little more than the unremarkable proposition that the actual patent license contract at issue was just badly written. But that would be a simple matter of applying state contract law to the underlying facts of the contract - not the type of issue that typically gains the Supreme Court's attention. So the real motivating force behind the Court's decision to take the case is probably something else. The extensive briefing and commentary, as well as the opinion's colorful dicta, all suggest that the true import of the case is the way it speaks about what patent contracting can be done - as a matter of Court-created policy for federal patent law.

If this view of Quanta is correct, then the decision may be remarkably important in several respects. It may greatly frustrate the ability of commercial parties to strike deals over patents. It may also stand as an example of a seemingly conservative Court acting in direct contravention of clear congressional action.

Abstract:
This short essay written for a broad audience addresses the problems that are at the center of current debates in academic and policy circles about the patent system. Most current patent reform proposals are designed to give officials and courts more power to weaken or eliminate ‘‘unworthy’’ patents and take primary aim at so-called patent trolls. This essay argues that in light of the rapid, and excessive, changes that have already occurred in the courts, what patent law needs is a tweaking of existing safety valves and processes—not opening the floodgates to more discretion and uncertainty.

patent, innovation

Abstract:
Complaints about frivolous patents abound in academic, business, and policy circles, and the focus of blame is usually on the large number of junk patents that have issued from the Patent Office that are actually invalid. The underlying cause is said to be the relatively modest examination performed by the Patent Office. Most popular proposals for change suggest methods for segregating patents into two or so bundles based on whether the patents should be subject to closer examination. A so-called “second window of review” has been proposed to allow competitors to make the choice of which patents get closer examination; and a so-called “gold-plated approach” has been proposed to allow patentees to make the election. Applying a back-to-basics approach, this Article points out two core problems with these popular proposals: (1) they do not adequately account for the information costs, error costs, and risks of capture that accompany any system premised on flexible and discretionary administrative review, and (2) they overlook the central lessons learned through debates over civil litigation generally about how to balance the conflicting goals of speed, cost, accuracy, and finality. The Article then elucidates how some small changes to our patent system could be used to better solve the problem of bad patents than would other popular proposals. This small number of changes, which are implementable through either case law or statute, would interact to make available a symmetrical risk of fee and cost shifting for bad-faith litigation over patents to encourage parties to exchange information and resolve disputes before getting deeply into expensive litigation. Such an approach would directly address the complaints of patent critics without injecting the degree of unpredictability and political manipulability into the system that would be caused by their proposed changes. It takes seriously the importance to the economy of strong intellectual property rights as well as reforms designed to lessen the negative impact of junk patents and frivolous lawsuits.

Abstract:
Few doubt the seriousness of the recent crisis afflicting the financial systems of the United States and the world. Few claim that nothing needs to be fixed. And few have missed the major debates about what types of solutions are best - often conducted at high volume, intensity, and frequency. So rather than try to add to one side or the other of the well-rehearsed arguments about each type of proposed reform, we try to refocus the analysis on some core incentives: when the basic rules of the game are changing, property rights and the rule of law are too ill-defined, creating exactly the wrong incentives for investment and economic growth. The wrong incentives created by repeated surges of bold government action pose risks that have direct, short-term impacts, which we fear have been seriously underexplored during both the end of the Bush administration and the beginning of the Obama administration. We hope that, by pointing out these risks, they can be significantly mitigated at relatively low cost.

We begin by recommending a change to the general approach: halt soon the introduction of new, bold programs. We are not saying that nothing should be done; we are saying that it is important in times like these for government to reach closure on its decisions so that it can pick one set of rules of the game and then stick to them. We then focus more narrowly on the process of structuring workouts from bad deals and recommend avoiding approaches that undermine bankruptcy. Bankruptcy allows the large group of private professionals who are experts at restructuring or winding up bad deals - consultants, financiers, lawyers, managers, and so on - to get involved. Given the magnitude of the problem of toxic assets, any solution to the current crisis will almost certainly need to involve these private actors. We then explore how particular reform proposals can be implemented without running afoul of the cautions that are the focus of our effort. In the final analysis, we applaud the Herculean efforts by so many serious thinkers in the Bush and Obama administrations and outside government who have thrown themselves into this important work in good faith and with great sacrifice. All we can hope to add to the conversation are these relatively easy-to-deploy (and important to deploy quickly) tools for mitigating some vital but underappreciated risks with proposed financial system fixes.

Abstract:
The Court should reject the Federal Circuit’s new, restrictive approach to patent eligibility because it is in conflict with the statute, the precedents of this Court, and sound public policy. The Federal Circuit’s narrow interpretation of patent eligibility strikes first at excluding patents in the area of business methods and software, in direct conflict with the Court’s decision in Diehr. Worse still, the Federal Circuit’s approach could easily cast a pall over all method claims in other areas of technology. Given the long established links between the eligibility rules for software and biotech, it is likely to spread its tentacles to biotech in particular, thereby undermining the huge boost that the Court’s decision in Chakrabarty gave to bioscience. Furthermore, the Federal Circuit’s approach will have a profound adverse effect on the public’s ability to benefit from Dr. Chakrabarty’s own research.

Business Methods, patents, innovation, software, biotechnology