Progress in the Useful Arts: Foundations of Patent Law in Growth Economics
65 Pages Posted: 5 Nov 2020
Date Written: March 10, 2020
The U.S. Constitution authorizes Congress to issue patents to promote progress in the useful arts, which we interpret as increasing economic growth through innovation. To ground patent law, we formulate two principles of growth economics. First, selling patents to consume or produce transfers resources to innovating, which speeds growth. Conversely, selling patents to innovate redistributes resources among innovators with deadweight loss, which usually slows growth. Thus, patent protection should be strong against using an innovation to produce or consume, and weak against using an innovation to innovate (separation principle). Second, human welfare can increase exponentially from innovation and quickly overtake any losses from static inefficiency or inequality (overtaking principle). Welfare overtaking is the ethical and political justification of the Constitution’s patent clause. Like the Constitution, welfare overtaking suggests that patent interpretation and policy should focus on innovation, not static efficiency or redistribution. Separation and overtaking guide patent law toward its constitutional purpose and increases social welfare from innovation. Alas, in recent years, patent policy has lost its economic foundations. Courts are making doctrinal adjustments that celebrate commercial success instead of innovative superiority (in contrast to the separation principle), and Congress is called upon to reduce static inefficiency concerns and improve consumer access (in contrast to the overtaking principle). This Article criticizes these recent legal developments and proposes several doctrinal adjustments to the law of improvements and experimentation that would bring patent policy closer to its constitutional mandate.
Keywords: patent, innovation, growth, economics, incentives, efficiency, holdout, holdup, thickets, copyrights
Suggested Citation: Suggested Citation