The Debilitating Effect of Exclusive Rights: Patents and Productive Inefficiency

William Hubbard

University of Baltimore - School of Law

March 19, 2014

Florida Law Review, Forthcoming

Are we underestimating the costs of patent protection? Scholars have long recognized that patent law is a double-edged sword. While patents promote innovation, they also limit the number of people who can benefit from new inventions. In the past, policymakers striving to balance the costs and benefits of patents have analyzed patent law through the lens of traditional, neoclassical economics. This Article argues that this approach is fundamentally flawed because traditional economics relies on an inaccurate oversimplification: that individuals and firms always maximize profits. In actuality, so-called “productive inefficiencies” often prevent profit maximization. For example, cognitive biases, bounded rationality, habituation, and opportunism all contribute to productive inefficiencies that harm individuals, firms, and ultimately society. Moreover, a variety of theoretical analyses and empirical studies demonstrate that robust competition reduces productive inefficiencies. Consequently, patents that substantially limit competition exacerbate productive inefficiencies, and an important effect of patent law has been systematically overlooked. This Article begins to fill this void and demonstrates that consideration of productive inefficiencies sheds new light on numerous unresolved and contentious debates in patent law.

Number of Pages in PDF File: 63

Keywords: patent, innovation, efficiency, economics, neoclassical, cognitive, bounded rationality, experimental use, commercialization, claim construction, patent scope, patent office, examination, competition, rivalry, x-inefficiency, internal efficiency, organizational slack, technical inefficiency

JEL Classification: B13, D61, D21, D24, D4, D6, D8, K00, K33, K39, L1, L2, O00, O1, O3

Open PDF in Browser Download This Paper

Date posted: February 2, 2014 ; Last revised: June 19, 2014

Suggested Citation

Hubbard, William, The Debilitating Effect of Exclusive Rights: Patents and Productive Inefficiency (March 19, 2014). Florida Law Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2389145 or http://dx.doi.org/10.2139/ssrn.2389145

Contact Information

William Hubbard (Contact Author)
University of Baltimore - School of Law ( email )
1420 N. Charles Street
Baltimore, MD 21218
United States
Feedback to SSRN

Paper statistics
Abstract Views: 525
Downloads: 92
Download Rank: 189,281

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.406 seconds