Engineering a Deal: Toward a Private Ordering Solution to the Anticommons Problem

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.

Keywords: Intellectual Property, Anticommons, Patent

JEL Classifications: A12, B15, B25, D23, D29, D61, K11, K20, K29, K39

Working Paper Series