Patent Tying, Price Discrimination, and Innovation

Abstract:     
Patent law is the cornerstone of American innovation policy. The relationship between patents and innovation, however, is more complicated than the simple explanation that patents reward innovators. Patent holders sometimes engage in conduct that can reduce innovation. This article examines one type of such conduct: tying arrangements. Patentees sometimes employ tying arrangements as a metering device to effect price discrimination. While some commentators would justify patent tying as pro-innovation because it increases the rewards to the patentee.

This Article addresses with the argument that price discrimination through patent tying encourages innovation. In particular, it reviews the innovation arguments made in favor of patent tying; critiques these arguments by explaining how metered tying is not necessarily an appropriate mechanism for rewarding and funding research efforts; explains how patent tying can reduce the incentives for innovation in the tied product market; and discusses how antitrust law should treat patent tying in light of the impact that such tying may have on incentives to innovate.

Number of Pages in PDF File: 45

Accepted Paper Series