Cumulative Innovation in Patent Law: Making Sense of Incentives

Abstract

New innovation can be vastly dependent upon patented technologies. Despite growing awareness within the legal community of the chilling effect that the patent system may have on research and development, U.S. patent law still does not provide adequate solutions to conflicts that may arise in a cumulative innovation setting. Against this background, this Article embarks on a comprehensive analysis of cumulative innovation. Examining the issue from the perspective of the well-versed incentive to invent theory - while accounting for certain important aspects that have been overlooked so far in legal scholarship - this Article suggests three main mechanisms that can work in tandem to ensure appropriate incentives in a cumulative innovation setting. The first mechanism, the Absolute Scope Principle, ensures the first inventor's incentive by including the exploitation of all follow-on inventions - including products developed through use of patented research tools - within the scope of the first patent, subject only to a narrow exemption doctrine based on a reasonable expectations test. This mechanism is balanced by a wide experimental use exception, allowing development of any follow-on invention without receiving advance permission of the original patentee (the second mechanism); and liability rule doctrines (the third mechanism) allowing non-consented exploitation of follow-on inventions in return for a reasonable royalty in case the inventors failed to reach a voluntary agreement. The Article concludes with a critical examination of U.S. patent law, offering concrete suggestions for patent law reform necessary in order for the U.S. to provide a supportive environment to cumulative research and maintain a leading position in innovation markets.

Keywords: intellectual property, patent law, incentives, cumulative innovation, reasonable expectations, experimental use, patent scope, liability rules