Probabilistic Patents

Journal of Economic Perspectives, Vol. 19, p. 75, 2005

Stanford Law and Economics Olin Working Paper No. 288

42 Pages Posted: 23 Jul 2004  

Mark A. Lemley

Stanford Law School

Carl Shapiro

University of California, Berkeley - Haas School of Business

Abstract

Economists often assume that a patent gives its owner a well-defined legal right to exclude others from practicing the invention described in the patent. In practice, however, the rights afforded to patent holders are highly uncertain. Under patent law, a patent is no guarantee of exclusion but more precisely a legal right to try to exclude. Since only 0.1% of all patents are litigated to trial, and since nearly half of fully litigated patents are declared invalid, this distinction is critical to understanding the economic impact of patents. The growing recognition among economists and legal scholars that patents are probabilistic property rights has significant implications for our understanding of patents in four important areas: (1) reform of the system by which patents are granted; (2) the legal treatment of patents in litigation; (3) the incentives of patent holders and alleged infringers to settle their disputes through licensing or cross-licensing agreements rather than litigate them to completion; and (4) the antitrust limits on agreements between rivals that settle actual or threatened patent litigation.

Suggested Citation

Lemley, Mark A. and Shapiro, Carl, Probabilistic Patents. Journal of Economic Perspectives, Vol. 19, p. 75, 2005; Stanford Law and Economics Olin Working Paper No. 288. Available at SSRN: https://ssrn.com/abstract=567883 or http://dx.doi.org/10.2139/ssrn.567883

Mark A. Lemley (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Carl Shapiro

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)

HOME PAGE: http://faculty.haas.berkeley.edu

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