The Independent-Invention Defense in Intellectual Property
John M. Olin Law and Economics Working Paper No. 98-11
Posted: 26 Feb 1999
Date Written: October 1998
Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&D.
JEL Classification: O31
Suggested Citation: Suggested Citation