The Problem of Patent Underdevelopment

Abstract

Commentators have long recognized that much of the work of commercializing an invention occurs after a patent is received. They have not recognized, however, that by the time market conditions make commercialization potentially attractive, the remaining patent term might be sufficiently short that a patentee will not develop an invention or will not spend as much on development as if more patent term remained. The concern about patent underdevelopment provides a counterweight to patent prospect theory, which urges that patents be issued relatively early. By insisting on a substantial degree of achievement before patenting, the patent system reduces the risk of patent underdevelopment. Underdevelopment may still be a problem for some inventions, however, for example in the field of genomics. A possible solution is a system of patent extension auctions. A patentee would be allowed to request such an auction, but could win it only by substantially outbidding third parties. Patentees will call for auctions only when the benefits of ownership continuity, and thus of continued patent development, are relatively high.

JEL Classification: O34