Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor after Eldred

81 Pages Posted: 10 Aug 2004  

Shubha Ghosh

Syracuse University College of Law

Date Written: August 9, 2004

Abstract

The metaphor of the patent bargain, the notion that a patent represents the grant of the right of exclusivity in exchange for the disclosure of a novel invention, is generally accepted among the members of the patent law community. Evidence of the metaphor's persuasiveness and pervasiveness is provided by the Supreme Court's reliance on the patent quid pro quo as a framing device to address the question of the constitutionality of copyright term extension in Eldred v. Ashcroft.

This article challenges the coherence and purchase of the patent bargain metaphor by arguing that it rests on an outdated notion of the state inconsistent with the many regulatory goals of patent law. The central thesis is that the patent law community should replace the quid pro quo metaphor with a regulatory theory of patents that sees patent law as regulating primary conduct in the innovation process. The adoption of a regulatory theory of patent would aid not only in avoiding some of the conceptual errors in the Eldred decision, but also in understanding recent reform proposals forwarded by the National Academy of Science and the Federal Trade Commission. While this article presents a critique of many existing patent reform proposals, such as the narrowing of subject matter in consideration of competitive concerns and the loosening of the presumption of validity, the article agrees with the spirit of the proposals as examples of the regulatory theory of patent law in practice.

The challenge to the patent bargain metaphor is made first as a broad criticism of social contract theory as applied to patent law. It is argued that social contract theory rests on a quaint and pre-modern notion of government which is inconsistent with the realities of the modern regulatory state. It is also argued that social contract theory rests on a misguided reliance on the prisoner's dilemma as a characterization of the problems in private ordering that patent law is designed to address. The prisoner's dilemma is shown to ignore the role of reciprocity and trust in the innovation process. The article presents the assurance game as an alternative representative of the problem of private ordering and basis for patent law. The assurance game expressly incorporates reciprocity and trust into an evolutionary view of the prisoner's dilemma and supports the view that patent law is a regulatory system designed to promote reciprocity and trust much like securities law.

The assurance game is used to critique four existing theories of patent law: the prospecting theory, the information costs theory, the business asset theory, and the industry regulation theory. Finally, three salient patent reform proposals, limitations on patentable subject matter, the NAS reform proposals, and the FTC reform proposals are addressed within the frame of the assurance game. These applications demonstrate the power of thinking of patent law in terms of the assurance game and represent the initial steps towards developing a regulatory theory of patent law.

Keywords: Patents, regulation, law & economics

Suggested Citation

Ghosh, Shubha, Patents and the Regulatory State: Rethinking the Patent Bargain Metaphor after Eldred (August 9, 2004). Available at SSRN: https://ssrn.com/abstract=574141 or http://dx.doi.org/10.2139/ssrn.574141

Shubha Ghosh (Contact Author)

Syracuse University College of Law ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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