A Cost-Benefit Approach to Patent Obviousness

Abstract:     
The standard to determine whether an invention is innovative, known as the obviousness standard, has been a continuing mystery in patent law. Courts try to determine obviousness by asking if the patented invention was nonobvious and embodied sufficient ingenuity. The problem with this ingenuity approach is that it lacks objectivity. What is ingenious to one person appears obvious to another.

This Article proposes a new test for patentability, with two key insights. The first is that what matters for society is not whether the invention embodies ingenuity, but rather whether the patent reward creates more benefits than costs. The second is that the benefits and costs depend on when society would otherwise have had the same invention. Social cost begins accruing when, absent the patent reward, society would still have received the same invention through an independent inventor. This cost must be balanced against the benefits of having the invention earlier, before independent invention, due to patent system incentives.

Keywords: Patent, Obviousness, Independent Invention, KSR, Cost Benefit

JEL Classifications: K11

Accepted Paper Series