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The changing function of patents: a reversion to privileges?

Published online by Cambridge University Press:  02 January 2018

Jessica C. Lai
Jessica C. Lai*
Affiliation:
Victoria University of Wellington
*
Jessica C. Lai, Senior Lecturer of Commercial Law, Victoria University of Wellington, New Zealand. E-mail: [email protected]
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Abstract

Since its inception, patent law has had many faces, manifesting different aims and functions. The latest recalibrations of the aims and functions of patent law are striking because – at its core – patent law itself has not changed significantly in this time. This paper examines the chameleon-like nature of the function of patents, tracking historical transformations from the privilege as an instrument of trade policy, to patents as an incentive/reward to invent and disclose the invention, and the most recent shift towards viewing patents as necessary for innovation. In particular, the paper addresses whether the latest shift represents a reversion to privilege-like functions, due to the analogous focus on commercialisation, and argues that this is not the case because of the fundamental move to focusing on patentees rather than society as a whole and to seeing patents as property.

Type
Research Article
Information
Legal Studies , Volume 37 , Issue 4 , December 2017 , pp. 807 - 837
Copyright
Copyright © Society of Legal Scholars 2017

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References

1. The ‘Modern Era’ of intellectual property, including patents, is considered to have started mid-nineteenth century; Sherman, B and Bently, L The Making of Modern Intellectual Property Law: The British Experience, 1760-1911 (Cambridge: Cambridge University Press, 1999)Google Scholar.

2. See eg OECD and Eurostat, Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (Paris: OECD, 3rd edn, 2005) ch 3; Sterckx, S ‘The ethics of patenting - uneasy justifications’ in Drahos, P (ed), Death of Patents (London: Lawtext Publishing and Queen Mary Intellectual Property Research Institute, 2005) p 195 Google Scholar. Of course the distinction between invention and innovation is by no means well delineated. The two usually take place simultaneously. For example, further invention may be required to bring something to market. This further invention may even be patentable.

3. Cornish, W, Llewelyn, D and Aplin, T Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (London: Sweet & Maxwell, 7th edn, 2010) paras 3-36-3-48Google Scholar.

4. Patents are often mistakenly stated as granting monopolies, eg in Alexander, GS and Peñalver, EM An Introduction to Property Theory (Cambridge: Cambridge University Press, 2012) p 185 CrossRefGoogle Scholar. However, as noted by RA Epstein ‘Intellectual property: old boundaries and new frontiers’ (2001) 76(4) Ind LJ 803, 817, the grant of a ‘legal monopoly’ does not necessary result in a ‘market monopoly’, because patents do not preclude the introduction of close substitutes or competing products/services. See also EW Kitch ‘Elementary and persistent errors in the economic analysis of intellectual property’ (2000) 53 Vand L Rev 1727, 1729-1730; KW Dam ‘The economic underpinnings of patent law’ (1994) 23 J Legal Stud 247, 249-251, who submits that a better description for patents would be the grant of ‘economic rents’ (a cost advantage that one economic actor enjoys over competitors). The fact that patents seldom confer market monopolies (and the fact that patent owners can price discriminate) means that the deadweight loss usually associated with monopolies may not be so extreme; FS Kieff ‘Property rights and property rules for commercializing inventions’ (2001) 85 Minn L Rev 697, 727-732.

5. PS Menell ‘Intellectual property: general theories’ in B Bouckaert and G de Geest (eds) Encyclopedia of Law and Economics, Volume I. The History and Methodology of Law and Economics (Cheltenham: Edward Elgar 2000) pp 146-147.

6. Dam, above n 4, p 247.

7. Chisum, DS et al Principles of Patent Law (Foundation Press, 2nd edn, 2001) 6 Google Scholar; Cornish et al, above n 3, paras 3-05-3-06, 3-49-3-51.

8. Alternatively, property exists to avoid a ‘tragedy of the commons’, whereby people overuse resources, eg over-hunt. In essence, the tragedy of the commons refers to the inefficient and shortterm over long-term use of resources; see H Demsetz ‘Toward a theory of property rights’ (1967) 57(2) Am Econ Rev 347. That intellectual products can suffer from a tragedy of the commons has been challenged; see MA Lemley ‘Property, intellectual property, and free riding’ (2005) 83 Tex L Rev 1031, 1050-58; Epstein, above n 4, 823; JF Duffy ‘Rethinking the prospect theory of patents’ (2004) 71 U Chi L Rev 439; and discussion pt 2.

9. Demsetz, above n 8, p 359: ‘If a new idea is freely appropriable by all, if there exist communal rights to new ideas, incentives for developing such ideas will be lacking. The benefits derivable from these ideas will not be concentrated on their originators. If we extend some degree of private rights to the originators, these ideas will come forth at a more rapid pace’. See also Bessen, J and Meurer, MJ Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton, NJ: Princeton University Press, 2008) pp 6, 34-35Google Scholar.

10. TW Merrill and HE Smith, ‘What happened to property in law and economics?’ (2001) 111 Yale LJ 357, 360-366.

11. Bessen and Meurer, above n 8, pp 38-40. See also E Burke ‘Reflections on the revolution in France’ (1790) foreword and notes by Francis Canavan (Carmel, IN: Liberty Fund, Inc, 1990) on the stabilising effects of property on society.

12. On the birth of privileges and patents, see A Mossoff ‘Rethinking the development of patents: an intellectual history, 1550-1800’ (2001) 52 Hastings LJ 1255, 1259-1276.

13. MacLeod, C, Inventing the Industrial Revolution. The English Patent System, 1660-1800 (Cambridge: Cambridge University Press, 1988) p 205 CrossRefGoogle Scholar. See also C Dent ‘“Generally inconvenient”: the 1624 Statute of Monopolies as political compromise’ (2009) 33 Melb Univ L Rev 415, 418-420; Ricketson, S, Richardson, M and Davison, M Intellectual Property: Cases, Materials and Commentary (Chatswood: Lexis Nexis Butterworths Australia, 2013) pp 685–686 Google Scholar.

14. S Ricketson ‘Business method patents-a matter of convenience?’ (2003) 2 IPQ 97, 113.

15. This is because s 6 of the Statute of Monopolies states that patents can only be granted for manners of new manufactures that are not ‘inconvenient’ and do not hurt trade, meaning that patents could not be issued for something that would infringe on the livelihoods of established workers, ie something that would compete with an existing product or service, such as improvements. See Mossoff above n 12, pp 1262-1264, 1273. Because privileges were only granted for entirely new technologies, trades or manufactures, and not improvements, and they could not be granted if they would somehow lose their trade or livelihood, privileges were far likely to result in market monopolies than modern patents (see n 4).

16. J Pila ‘The common law invention in its original form’ (2001) 3 IPQ 209, 214.

17. On the instrumentality of early privileges, see Drahos, P A Philosophy of Intellectual Property (Aldershot: Dartmouth Publishing, 1996) pp 29–32 Google Scholar.

18. P Drahos ‘Death of a patent system - introduction’ in Drahos, above n 2, p 2.

19. Mossoff, above n 12, p 1270.

20. MacLeod, above n 13, p 206.

21. Ibid, pp 207-209.

22. Pila, above n 16, pp 214-215, see also 211-12. See also Drahos, above n 17, p 31, who states that ‘entrepreneurship’ was being rewarded by early privileges.

23. This is also clear from the historical context of patents and the fact that most patent systems formerly granted patents to the first to import, rather than actually invent. There is a long line of English case law supporting this supposition, see Clothwokers of Ip switch (1615) 78 ER 147; Plimpton v Malcomeon (1876) 3 ChD 531; Marsden v Saville St Foundry and Engineering Co (1878) 3 ExD 203, 206; Curwen's Application (1912) 30 RPC 128; Du Pont de Nemours & Company's Application [1965] RPC 582, 584 (Lloyd-Jacob J).

24. Thambisetty, S ‘Sufficiency of disclosure in the common law: complexity, divergence and confusion’ in Ng, CW, Bently, L and D'Agostino, G (eds), The Common Law of Intellectual Property (Oxford: Hart Publishing, 2010) pp 199–200 Google Scholar. See also A Monotti ‘Divergent approaches in defining the appropriate level of inventiveness in patent law’ in Ng, Bently and D'Agostino (eds), ibid, p 179.

25. M Biagioli ‘Patent republic: representing inventions, constructing rights and authors’ (2006) 73 SocRes 1129, 1138, 1146. See also A Mossoff ‘Exclusion and exclusive use in patent law’ (2009) 22 Harv JL & Tech 321, 366-367, who notes that this places privileges in stark contrast with today's patents, as the former ‘imposed on their recipients an affirmative duty to practice the trade’ making the privilege a positive grant with ‘use rights’, whereas the latter grants a negative right to exclude.

26. This is why the patent term was 14 years, as the standard apprenticeship was for seven years. See Dent, above n 13, p 419; Biagioli, above n 25, pp 1133-1134; Pottage, A and Sherman, B Figures of Invention: A History of Modern Patent Law (Oxford: Oxford University Press, 2010) pp 24–25 CrossRefGoogle Scholar.

27. Biagioli, above n 25, p 1137. On examples of early voluntary specifications, see Mossoff, above n 12, pp 1290-1291.

28. Pottage and Sherman, above n 26, p 23.

29. Biagioli, above n 25, pp 1133-1134.

30. Ibid.

31. Sherman and Bently, above n 1, pp 142-149. See also J Hughes ‘The philosophy of intellectual property’ (1988) 77 Geo LJ 287, 296 and 303, who notes that we can view Lockean labour theory normatively from the perspective that we should reward labour (desert theory), or instrumentally because we need to reward labour in order for it to take place (incentive theory). Hughes also states that, in practice, the two propositions co-exist and fusions of the two seem to be based on ‘value-added’ reasoning; that labour create social value and we want to incentivise and reward this (pp 305-306).

32. In Continental Europe copyright protection was and continues - to some degree - to be grounded in Kantian and Hegelian natural-rights theories related to personality and individuality. See I Kant ‘On the injustice of counterfeiting books’ (1785), reprinted in Sterling, JAL, World Copyright Law (Oxford: Sweet & Maxwell, 2nd edn, 2003)Google Scholar; Hegel, GWF, Philosophy of Right (Thomas M Knox Eng tr, Oxford: Oxford University Press, 1967)Google Scholar. For a critical analysis of the application of Kant and Hegel to intellectual property, see TG Palmer ‘Are patents and copyrights morally justified? The philosophy of property rights and ideal objects’ (1990) 13 Harv J L & Pub Pol'y 817, 837-849. For a discussion on Kant and intellectual property, see Merges, RP, Justifying Intellectual Property (Cambridge, MA: Harvard University Press, 2011) pp 68–101 CrossRefGoogle Scholar; A Barron ‘Kant, copyright and communicative freedom’ (2012) 31(1) Law Philos 1. On a Hegelian justification of intellectual property, see MJ Radin ‘Property and personhood’ (1982) 34 Stan LRev957;Drahos, above n 17, ch4; Hughes, above n 31, pp 330-365. Note: Locke's statements that ‘he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property’ (John Locke, Two Treatises of Government (Peter Laslett ed, Cambridge: Cambridge University Press, 2nd edn, 1960) s 27) likens Lockean theory to personality theory, raising analogies with Hegel; see A Rapaczynski ‘Locke's conception of property and the principle of sufficient reason’ (1981) 42(2) J Hist Ideas 305, 307; Drahos, above n 17, p 75.

33. Sherman and Bently, above n 1, pp 23-24.

34. Locke, above n 32, s 27. That labour should result in property has been criticised because we simply do not reward all labour and when we do reward labour we do not always do so with property; Palmer, above n 32, p 834. Are we then supposed to determine property based on the ‘value added’ by the labour and, if so, how would we do this? How do we take into account cumulative creation? See Sterckx, above n 2, pp 181-182, see also pp 187-188 where Sterckx notes other aspects of patent law that do not fit a natural-rights basis for property.

35. Locke, above n 32, s 28.

36. Indeed, Hughes has argued that Locke's proviso that the commons should not be overexploited (Locke, above n 32, s 27, stating ‘at least where there is enough, and as good, left in common for others’) is better met by intellectual property than physical property. This is because: (1) ideas and their use are inexhaustible. More still, there are many laws and norms that ensure that ideas are never exclusively protected by intellectual property, eg as a result of privacy and freedom of expression laws, and rules about improvements patents and derivative works. And (2) certain ideas (such as everyday and extraordinary ideas) cannot be protected by intellectual property, so are in a ‘permanent commons’. Loss of protection due to genericness also ensures the protection of the commons. Hughes, above n 31, pp 313-323. See also Drahos, above n 17, pp 49-51.

37. Sterckx, above n 2, p 186.

38. As argued by AP Brogan ‘John Locke and utilitarianism’ (1959) LXIX(2) Ethics 79. See also Drahos, above n 17, p 44; Hughes, above n 31, p 299, who states that Locke's interest in the ‘common stock of mankind’ is ‘a utilitarian argument grounded in increasing mankind's collective wealth’. Hughes further notes (p 303) that the instrumental view of Lockean labour theory is ‘has a utilitarian foundation: we want to promote labor because labor promotes the public good’.

39. This is clear from the way that Locke discusses how cultivating lands from the commons (specifically in the Americas) gives it far greater value; Locke, above n 32, ss 37,40-43. See also Humphrey, C and Verdery, K ‘Introduction: raising questions about property’ in Humphrey, C and Verdery, K (eds) Property in Question: Value Transformation in the Global Economy (Oxford: Berg, 2004) pp 3-12Google Scholar

40. Dutton, HI The Patent System and Inventive Activity During the Industrial Revolution, 1950-1852 (Manchester: Manchester University Press, 1984) pp 17–18 Google Scholar; MacLeod, above n 13, p 197; Drahos, above n 17, p 32.

41. Mossoff, above n 12, pp 1288-1215. Mossoff notes (p 1318), ‘[o]nce patents were taken up by the common-law courts in toto [the Privy Council having refused to relinquish its jurisdiction over patents until 1753, despite s 2 of the Statute of Monopolies], the eighteenth-century judges were free to apply their assumptions about society and rights to this new and untested commonlaw doctrine. The result was the specification and novelty requirements-seeds planted in the seventeenth century that eventually sprouted in a soil enriched with Lockean theories about natural property rights and civil society’.

42. Ibid, p 1303.

43. Ibid, pp 1306-1308. On the extent to which Lockean theory can be used to justify intellectual property (as opposed to how it has actually been used to develop it), see Hughes, above n 31, pp 296-330.

44. Note: certain interpretations of Lockean labour theory hold it as an instrumentalist or consequentialist theory; Hughes, ibid, pp 305-306.

45. Sherman and Bently, above n 1, pp 173-176. However, inventors and patentees themselves may still think of patents as a just reward for their labour, or even as an extension of their person in a Kantian or Hegelian sense; Kant, above n 32; Hegel, above n 32. See the data collected by J Silbey ‘Patent variation: discerning diversity among patent functions’ (2013) 45 Loy U Chi LJ 441, 472-75.

46. Palmer, above n 32, pp 850-851. While Palmer acknolwedges that people are more productive when stable property acts as an incentive, he argues against grounding intellectual property in utilitarian arguments because intellectual property ‘does not have the “static” scarcity that tangible property has, and therefor does not qualify as a locus of property rights within justice-as-order argument’. (p 851) As Palmer notes, rather than arising from scarcity, intellectual property causes scarcity (pp 860-861, 863-865).

47. In Liardetv Johnson (1778) 1 WPC 53. See also Turner v Winter (1787) 99 ER 1274 (KB). For commentary, see MacLeod, above n 13, p 49 l; Boehm, K The British Patent System, Vol. I: Administration (Cambridge: Cambridge University Press, 1967) pp 20–21 Google Scholar; J Pila ‘Inherent patentability in Anglo-Australian law: A History’ (2003) 14 AIPJ 111, 113.

48. Sherman and Bently, above n 1, pp 142-157. Sherman and Bently argue that from the midnineteenth century we stopped focusing on mental labour and creativity as the core organising principle of intellectual property, and started to justify intellectual property via consequentialist means. In other words, it was no longer the value of the labour or creativity that mattered, but the contribution of the work, invention, design, etc. itself, as according to economic theory and particularly utilitarianism. This change occurred concurrently with the judicial retreat from judging quality and thus reluctance to assess things like labour or creativity, in contrast to the consideration of something measurable such as the economic contribution of a work or invention. Moreover, with respect to registered forms of intellectual property, mental labour and creativity were no longer as important as the property as registered (pp 173-182). The authors, however, note that mental labour and creativity have not disappeared completely, but can be seen in different guises, such as the requirements of originality and non-obviousness (pp 199-204). See also Chisum et al, above n 7, p 15.

49. See Boulton & Watt v Bull (1795) 126 ER 651, 654 (CP), where Justice Buller stated that ‘[t]he specification is the price which the patentee is to pay for the monopoly’. Notably, Mossoff has argued that the social contract between the inventor and state is also a reflection of Lockean labour theory. Mossoff, above n 12, pp 1289-1302. Mossoff stated (p 1298), ‘[t]he claim that an inventor's natural right terminates in the legal arrangement of disclosing his invention in exchange for a legal right, ie a patent, conforms perfectly with the Lockean conception of the original social contract’.

50. Biagioli, above n 25, p 1138.

51. Pottage and Sherman, above n 26, pp 53-54. Later on in their treatise they discuss how this might not be the case with patents for plants in the US, for which reduction to practice has been important for finding ‘invention’, as ‘unlike mechanical inventions, plant inventions were not the products of a prior design, so the moment of conception was “not so readily determined”’, meaning that there was no steps between conception and reduction to practice. With plant inventions (and also some chemical inventions), conception and reduction to practice happened simultaneously (pp 176-177).

52. Mossoff, above n 12, pp 1263-1264, 1288, 1303, 1308.

53. Pila, above n 47, pp 113-114.

54. Landes, WM and Posner, RA, The Economic Structure of Intellectual Property Law (Cambridge MA: Harvard University Press, 2003) pp 294, 326-332Google Scholar; BH Hall and D Harhoff ‘Recent research on the economics of patents’ (2012) 4 Annu Rev Econom 541, 542.

55. MA Lemley ‘The myth of the sole inventor’ (2012) 110 Mich L Rev 709, 712-733, who discusses the social (rather than individual) phenomenon of invention and the consequential prevalence of simultaneous invention; and Alexander and Peñalver, above n 4, pp 194-195.

56. Pope Appliance Corporation v Spanish River Pulp & Paper Mill Ltd (1929) 46 RPC 23, 55 (Viscount Dunedin); Drahos, P The Global Governance of Knowledge: Patent Offices and Their Clients (Cambridge: Cambridge University Press, 2010) pp 27–32 CrossRefGoogle Scholar; MacQueen, HL, Waelde, C and Laurie, GT Contemporary Intellectual Property: Law and Policy (Oxford: Oxford University Press, 2008)Google Scholar paras 10.15-10.16.

57. See eg Landes and Posner, above n 54; Dam, above n 4. cf A Rahmatian ‘A fundamental critique of the law-and-economics analysis of intellectual property rights’ (2013) 17(2) Marq Intell Prop L Rev 191, who argues against the use of economics in law, in general, because law is a normative social science and is at its core about justice, not economic efficiency and wealth maximisation. With respect to patents, Rahmatian is particularly concerned with the absence of inventor as an actor within law-and-economics analyses, due to a focus on patent owners (pp 210-211).

58. Demsetz, above n 8, p 350.

59. Dan Burk has challenged the idea that products of intellectual property are public goods. See Burk, DL ‘Copyright and the New Materialism’ in Lai, JC and Maget Dominicé, A (eds), Intellectual Property and Access to Im/material Goods (Cheltenham: Edward Elgar, 2016) p 44 CrossRefGoogle Scholar.

60. RA Posner ‘Intellectual property: the law and economics approach’ (2005) 19(2) J Econ Perspect. 57, 58.

61. See eg Silbey, above n 45, who discusses qualitatively the different functions that patents have; Lemley, above n 8, who argues that it is incorrect to think about intellectual property as real property, ie the incentive theory and the avoidance of a tragedy of the commons.

62. Lemley, above n 8, p 1065, states that ‘it also seems at least highly probably that intellectual property increases innovation and creation relative to a world without intellectual property rights, though it is hard to say by how much. For a summary on theoretical and empirical research on whether patents do indeed function as incentives for invention and innovation, see Hall and Harhoff, above n 54.

63. See eg AD Moore ‘Intellectual property, innovation, and social progress: the case against incentive based arguments’ (2003) 26(3) Hamline L Rev 602; TG Palmer ‘Intellectual property: a non-Posnerian law and economics approach’ (1989) 12(2) Hamline L Rev 261; EC Hettinger ‘Justifying intellectual property’ (1989) 18(1) Philos Public Aff 31, 47-51. For a critique on non-patent means to incentivise invention, see Kieff, above n 4, pp 705-717, whose core argument is that, while these may incentivise invention, non-patent incentives do not incentivise commercialisation.

64. Bessen and Meurer, above n 9, pp 217-218.

65. Y Benkler ‘Commons-based strategies and the problems of patents’ (2004) 305 Science 1110, 1111.

66. R Feldman ‘The open source biotechnology movement: is it patent misuse?’ (2004) 6(1) Minn JL Sci& Tech 117, 161.

67. On scientific norms and patents, see RS Eisenberg ‘Patents and the progress of science: exclusive rights and experimental use’ (1989) 56 U Chi L Rev 1017. On patents as a means of disclosure compared to academic articles, see N van Zeebroeck et al ‘Patents and academic research: a state of the art’ (2008) 9(2) JIC 246. cf Bessen and Meurer, above n 9, pp 168-173, who highlight that many inventions, including breakthrough inventions, are nevertheless created in large companies. At the same time, they find that patents may be an overall disincentive for publicly listed companies (ch 6). Moreover, it is incorrect to presume that just because a lot of research is undertaken by universities and publicly funded institutes, the patent incentive is not necessary. More and more, universities and public research organisations also seek and hold patents (a phenomenon that started in the mid-twentieth century and gained speed in the 1980s with the advent of the biotech era); van Zeebroeck et al, ibid, pp 249-251. Indeed many small firms and university ‘technology transfer offices’ have spun off or resulted from such patents; MA Heller and RS Eisenberg ‘Can patents deter innovation? The anticommons in biomedical research’ (1998) 280 Science 698, 698; van Zeebroeck et al, ibid, p 249. This is partially because what constitutes as patent-eligible subject matter is broadening to include basic research and basic research is often commercialised, such as in the biotechnology and software industries; Eisenberg ‘Patents and the Progress of Science’, ibid, pp 1017-1018; RS Eisenberg ‘Proprietary rights and the norms of science in biotechnology research’ (1987) 97 Yale LJ 177, 195-196. This indicates that the notion that non-industry researchers are not part of the incentive equation is false. Put another way, these researchers (and perhaps more so the institutes that they work for) are also influenced by the patent inventive.

68. Bessen and Meurer, above n 9, pp 176-177.

69. Boehm, above n 47, pp 32-37.

70. Ibid, pp 22-24.

71. MacLeod, above n 13, ch 8, esp p 146.

72. Ibid, p 147. This continues today and many entities stockpile patents because everyone else does, resulting in a ‘nuclear deadlock’, where everyone might be better off if no one patented; Silbey, above n 45, pp 471-72.

73. MacLeod, above n 13, pp 156-157.

74. Bessen and Meurer, above n 9, 80. See also Drahos, above n 17, p 15, who notes that ‘[h]istory may teach us that the connection between intellectual property, science and economic development is contingent and local rather than necessary and universal’.

75. Silbey, above n 45, p 476; Bessen and Meurer, ibid, pp 14-16. Indeed, Bessen and Meurer conclude that - outside of the chemical and pharmaceutical industries - the aggregate costs of patents exceeded the aggregate private benefits of patents in the 1990s in the US (p 141). See also FM Scherer ‘A half century of research on patent economics’ (2010) 2(1) The WIPO Journal 20.

76. As discussed in Bessen and Meurer, above n 9, pp 81-84; Sterckx, above n 2, pp 200-202.

77. Scherer, above n 75, p 22.

78. Bessen and Meurer, above n 9, pp 88-89.

79. J Pénin and J-P Wack ‘Research tool patents and free-libre biotechnology: a suggested unified framework’ (2008) 37 Res Policy 1909, 1915.

80. See above, n 63.

81. Bessen and Meurer, above n 9, ch 6. This is only for public listed (and presumably larger) firms. Bessen and Meurer conclude that patents are an incentive for small inventors (ch 8).

82. Ibid, ch 6.

83. As discussed by Kieff, above n 4, pp 747-748, who supports broad patentability (including living organisms, gene fragments, computer software and financial services) on the basis that without patentability there is under-production and commercialisation in these fields. See also Menell, above n 5, pp 146-147; Silbey, above n 45, p 475; Ricketson et al, above n 13, pp 705-707; Report of the President's Commission on the Patent System ‘To promote the progress of … useful arts: In an age of exploding technology’ (1966) p 2: ‘a patent system stimulates the investment of additional capital needed for the further development and marketing of the invention’.

84. D Harhoff ‘The role of patents and licenses in securing external finance for innovation’ (2009) 14(2) EIB Papers, 74-95.

85. Kieff, above n 4, p 726.

86. On small inventors, see Bessen and Meurer, above n 9, pp 177-179.

87. Godt, C, Eigentum an Information (Tubingen: Mohr Siebeck, 2007) p 449 Google Scholar.

88. As noted by Sterckx, above n 2, p 195.

89. See eg SJH Graham et al ‘High technology entrepreneurs and the patent system: Results of the 2008 Berkeley Patent Survey’ (2009) 24(4) Berkeley Tech LJ 1255, 1283-1287. There were differences between industries as to the level of incentive (eg ‘moderate’ for the biotechnology industry and ‘slight’ for the software industry), however no industry reported that patents were a strong incentive to innovate.

90. Scherer, above n 75, p 22.

91. Posner, above n 60, p 66.

92. Graham et al, above n 89, pp 1290-1293.

93. Ibid, pp 1290-1293.

94. Ibid.

95. M Abramowicz and JF Duffy ‘Intellectual property for market experimentation’ (2008) 83 NYU L Rev 337.

96. Ibid, pp 372-374. See also Kieff, above n 4, pp 708-709.

97. Kieff, ibid, p 709.

98. Kieff, ibid, pp 724-725. Note: Kieff discusses the pharmaceutical industry under the biotech industry, when strictly speaking they are not the same industry, though they may be related and the boundary between the two may be amorphous.

99. Abramowicz and Duffy, above n 95, pp 345-353.

100. Ibid, pp 378-408. One interesting example they use is the historical grant of patents for importation (see n 23), which they argue reflect that patent law is concerned with experimentation in a new market (pp 341, 378-380). Abramowicz and Duffy further note that our concern with patent trolls (non-practising entities) highlights our concern for commercialisation, as these particular patentees otherwise satisfy the quid pro quo of the grant of the patent in exchange for the disclosure of the invention (pp 343-344). Importantly, Abramowicz and Duffy are very careful to note that incentivising market experimentation would not always be justified when we look at social gain overall, due to created costs, and also that it would not always result in increased intellectual property protection (pp 341, 363, 394-395).

101. Ibid, pp 405-1-08. Abramowicz and Duffy recognise that determining what is ‘commercially non-obvious’ would not be easy (pp 407-1-08, 410). See also T Sichelman, ‘Commercializing patents’ (2010) 62 Stanford L Rev 341.

102. MA Lemley ‘Ex ante versus ex post justifications for intellectual property’ (2004) 71 U Chi L Rev 129. See also Lemley, above n 55, pp 738-745.

103. See, however, Lemley, above n 55, where Lemley does question whether patents act as an incentive.

104. This argument is similarly made in Lemley, above n 8. Lemley argues against the prevention of free riding or the full internalisation of the social benefits of intellectual property should not be a means to determine its infringement, because this is not necessary for the creation of intellectual property, which will take place so long as protection is broad enough to ensure that one can ‘charge a sufficiently high price to ensure a profit sufficient to recoup their fixed and marginal expenses’. (p 1057)

105. Lemley ‘Ex ante versus ex post justifications for intellectual property’, above n 102, p 138.

106. Lemley, above n 8, pp 1050-1058. See also Duffy, above n 8, who discusses why basing prospect theory on an analogy between patents and real property does not solve the common pool problem. He instead proposes making an analogy between patents and natural monopolies (which exists where the average cost of production declines with each additional unit produced, as a result of high fixed costs but low marginal costs), due to the non-rival nature of intellectual property. See also Palmer, above n 32, pp 860-861 and 863-865, who similarly argues that we cannot justify intellectual property rights based on the requirement of property to ensure negotiation over scarce resources without resorting to conflict, because without the existence of intellectual property there is no scarcity of resource - intellectual goods are after all nonexhaustive and non-exclusive. It is intellectual property that creates the scarcity

107. Epstein, above n 4, p 823

108. Lemley ‘Ex ante versus ex post justifications for intellectual property’, above n 102, p 141.

109. See above n 83-87.

110. Hall and Harhoff, above n 54, Appendix 2, 5. The authors note, however, that this does not include pharmaceuticals. Though they are usually easily reverse-engineered, the extensive clinical testing means that patent documents can be very informative.

111. Sarnoff, JD ‘The current state of patent eligibility of medical and biotechnological inventions in the United States’ in Rimmer, M and McLennan, A (eds), Intellectual Property and Emerging Technologies: The New Biology (Cheltenham: Edward Elgar, 2012) pp 99–100 Google Scholar; van Zeebroeck et al, above n 67, p 252. cf Eisenberg ‘Patents and the progress of science’, above n 67, pp 1048-1055; Y Joly ‘Open source approaches in biotechnology: utopia revisited’ (2007) 59(2) Me L Rev 385, 392.

112. Lai, JC ‘The changing culture of patenting and its effects on research culture: university research and biotechnology’ in Howe, S and Lai, JC (eds), Recht und Kultur (Zurich: Schultess, 2015) pp 104–108 Google Scholar.

113. See Eisenberg ‘Proprietary rights and the norms of science in biotechnology research’, above n 67, who notes that, in many ways, the patent regime shares similarities with scientific norms because of the requirement of sufficient disclosure, much more so than the regimes of trade secrecy of breach of confidence, which do not allow for the dissemination of knowledge (p 194). Eisenberg concluded that, in some cases with biotechnology, the patent law disclosure is more effective than publication in academic journals. This is because replication of biotech research often requires access to biological materials (such as certain strains), which are clearly not made publicly available through journal publication. If a biological material is rare or difficult to access, simply refusing access to it may accord more exclusivity than a patent. Material transfer — even between universities — remains complex, encountering transaction and negotiation costs between lawyers and technology transfer offices, or researchers unwilling to share their materials out of fear of competition (p 198). Eisenberg stated that this highlights that academic researchers are prone to stray from the scientific norm of open disclosure and facilitating the progress of science, regardless of any intellectual property incentives (p 204). See also L Mandrusiak ‘Balancing open source paradigms and traditional intellectual property models to optimise innovation’ (2010) 63 (1) Me L Rev 303, 316-317. This essentially allows researchers to gain recognition for their work without making an effective disclosure and, thus, retain an advantage over their competitors (whether commercially or for future research).

114. WM Cohen et al ‘R&D spillovers, patents and the incentives to innovate in Japan and the United States’ (2002) 31 Res Policy 1349, 1362-1264; van Zeebroeck et al, above n 67, p 257; Hall and Harhoff, above n 54, p 550 and Appendix 2, 6. Though, evidently, the more valuable a patent, the more it is cited in other patents; D Harhoff et al ‘Citation frequency and the value of patented inventions’ (1999) 81(3) Rev Econ Stat 511.

115. Graham et al., above n 89, pp 1320-1323.

116. Ibid.

117. SB Seymour ‘The teaching function of patents’ (2010) 85(2) Notre Dame L Rev 621,625-626, 628-641; Hall and Harhoff, above n 54, p 542 and Appendix 2, 6.

118. Lemley ‘The Myth of the sole inventor’, above n 55, 746. Lemley has also suggested that the minor contribution of most patents (because invention is cumulative) does not justify the 20 year exclusivity offered by patents (p 747).

119. See A Devlin ‘The misunderstood function of disclosure in patent law’ (2010) 23(2) Harv JL & Tech 401, who argues that we should focus on the relationship between patents and the incentive to invent and commercialise, and only look at disclosure as an ancillary benefit. This is because patent documents are seldom drafted in a way that makes them a useful source of information and are also rarely used as a source of information. Furthermore, most inventions can be reverse-engineered, decreasing the importance of the patent disclosure, such that we should centre policy decisions on incentivising invention because this will result in disclosure. Devlin argues that we should be careful about basing policy decisions on disclosure because requiring disclosure can decrease the patent incentive. While Devlin is correct that many products and services can be reverse-engineered once they are brought to market, his argument that we should thus just see patents as an incentive to invent has several flaws. First, the patent disclosure of an invention is (at least in principle) broader than a product or service brought to market, as commercialisation is usually of on only one (or perhaps a few) possible embodiments of the invention. Secondly, it is highly questionable if we should expect third parties to invest in the experimentation required to reverse engineer a patented product or service. Third, Devlin argues that we should not allow for an experimental use exception because this weakens the incentive to invent (pp 432-437). Taken together, not focusing on the disclosure and not allowing for experimental use, would result in a prolonged effective patent term, as third parties would not be allowed to attempt to reverse-engineer the product/service until after the patent expires. This is presuming that the product/service can be reverse-engineered. Fourth, most patents are not commercialised, meaning that there is a bulk of inaccessible knowledge that cannot be reverseengineered because there is no marketed product or service. Moreover, combined with the fact that much research (particularly by non-academics) is only published in patents, there are many cases where the patent is the only medium of disclosure; see Seymour, above n 117, pp 665-666. As a consequence, Seymour proposed that we need to transform patents into readable teaching documents. Finally, Devlin presumes that disclosure requirement decreases the incentive to invent to a significant degree, without any evidence that this is indeed the case.

120. Graham et al., above n 89, pp 1303-1309.

121. This is particularly important in the biotech industry compared to the software and internet industries; Hall and Harhoff, above n 54, pp 552-553.

122. Graham et al, above n 89, pp 1279-1283.

123. Harhoff, above n 84, pp 80-82; Hall and Harhoff, above n 54, p 542; Silbey, above n 45, pp 454-146. See also Dutfield, G and Suthersanen, U Global Intellectual Property Law (Cheltenham: Edward Elgar, 2008) p 51 Google Scholar, who discuss the stakeholder analysis of intellectual property and note that the three main stakeholders are the author/inventor, the producer/investor and the consumer.

124. Silbey, above n 45, p 460.

125. Graham et al., above n 89, pp 1298-1302 and 1303-1309.

126. Silbey, above n 45, p 459.

127. Kieff, above n 4, pp 732-736, who states (p 735) ‘[r]ights of exclusion facilitate efforts for the social ordering and bargaining around inventions that are necessary to generate output’. See similarly Posner, above n 60, p 68, who suggests that, in contrast to patents, the fact that trade secrets are so difficult to contract around, increases their social costs, either because of the expensive negotiations involved or because the original inventor might choose to manufacture themselves instead of outsourcing to a more efficient manufacturer.

128. Bessen and Meurer, above n 9, pp 31, 35-36; Kitch, above n 4, p 1740, who stated ‘[i]t is clear that the ability of the owners of intellectual property rights to transfer these rights in whole or in part to others is an important feature of the systems. The rights can easily arise in the hands of persons or firms who are not in the best position to exploit them. In order to involve others in the full exploitation of the economic potential of the right, the owners must be able to enter into a wide range of arrangements with other firms’. The ability of property to structure transactions forms the basis of the ‘prospect theory’, which states that we should allow for early, broad patents in order to ensure coordinated development of a technology and minimise duplication of research; see EW Kitch ‘The nature and function of the patent system’ (1977) 20(2) J Law Econ 265. The prospect theory has been challenged; RP Merges and RR Nelson ‘On the complex economics of patent scope’ (1990) 90 Colum L Rev 839; DG McFetridge and DA Smith ‘Patents, prospects, and economic surplus’ (1980) 23 J Law Econ 197. See also Duffy, above n 8. For a critique on centring economic analysis on property's function of facilitating contractual transfer, see Merrill and Smith, above n 10. See also Lemley, above n 55, 748, who suggests that licences for patents do not facilitate the ongoing exchange of technological knowledge or know-how, but are predominantly cross-licences.

129. Pénin and Wack, above n 79, pp 1917-1918.

130. Silbey, above n 45, pp 466-467. There is, of course, a fine line between patents acting as a means of signally and coordination, on the one hand, and patents hindering cooperation and the downstream application of the different pieces of information, on the other hand. With reference to a comment by an interviewee regarding the use of patents as weapons, the patent landscape and patent landmines, Silbey stated: ‘The linguistic shift from “architecture” to “landscapes” charts a rhetorical move from patents as ornamental and functional frameworks that are constructed within necessary constraints to patents as essential features of the field of play in which one must strategically manoeuvre. These two spatial forms are related and share similarities. Nonetheless, we construct “architecture” and we react to “landscape.” The addition of “landmine” to the mix suggests a normative valence - danger and disaster! - implying that both patent architecture and patent landscapes can retard progress (by being blown up) rather than promote progress’. (p 470)

131. Godt, above n 87, pp 262, 402-405, 449.

132. W Newcomb Hohfeld ‘Some fundamental legal conceptions as applied in judicial reasoning’ (1913) 23(1) Yale LJ 16, 28-33 (on ‘jural relations’); FS Cohen ‘Dialogue on private property’ (1954) 4(2) Rutgers L Rev 357, 361-363 (‘on social relations’). On the development of the patent as a species of property and the historical and theoretical underpinnings that connect patents to general property in the US, see Mossoff, above n 25. Mossoff discusses why one sees patents as only providing ‘negative’ rights to exclude and how this shares analogies with general property and how this developed as a consequence of the evolution of generally property theory in the early twentieth century, in the US. On the analogies between physical property and intellectual property, see also Epstein, above n 4. A significant difference between physical property and intellectual property is that there can be legally allowed unauthorised use of the latter, eg via the experimental-use exception. See Posner, above n 60, pp 62-64, who argues that his makes economic sense because the non-exclusive nature of intellectual products, which means that it does not make sense to negotiate for certain uses because they do not prevent the owner from simultaneously using the product, unlike with physical property. Further to this, the fact that many exceptions to infringement are subject to reasonable compensation (especially within copyright law in Europe), intellectual property is often more akin to liability rules than property rules in accordance with the distinction established by G Calabresi and AD Melamed ‘Property rules, liability rules, and inalienability: one view of the cathederal’ (1972) 85(6) Harv L Rev 1089. As a response to Calabresi and Melamed's article, Epstein has argued that property rights should dominate because most things do not have a cash-value equivalent and liability rules create instability or a destabilising of possession, expectations and transactions; RA Epstein ‘A clear view of the cathedral: The dominance of property rules’(1997) 106 Yale LJ 2091. However, as argued by Posner (ibid) is not necessarily the case with intellectual products, because of their non-exclusive and non-exhaustive nature, which mean that third-party use does not deny the owner from possession and enjoyment.

133. Epstein, above n 4, pp 808-809, 816. On whether we can truly justify intellectual property rights based on the requirement of property to ensure negotiation over scarce resources without resorting to conflict, see the discussion of Palmer, above n 106.

134. Eg see discussion in Mossoff, above n 25; Posner, above n 60, p 58, who calls patents and copyright ‘limited property-rights systems’ because they enable owners ‘to exclude other from access to it’ without authorisation, ‘but not to exclude as completely as in the case of physical property’; Drahos, above n 17, pp 19-21, who discusses the historical debate about whether intellectual properties were indeed choses in action or incorporeal heriditaments.

135. As also noted by Mossoff ‘Exclusion and exclusive use in patent law’, above n 25, pp 322 and 326. See also HE Smith, ‘Intellectual property as property: delineating entitlements in information’ (2007) 116 Yale LJ 1742.

136. Eg 35 USC 261; Patents Act 1977 (UK), s 30; Patents Act 2013 (NZ), s 17(1).

137. Eg Personal Property Securities Act 1999 (NZ), s 16.

138. See above part 2 and n 32. See also Alexander and Peñalver, above n 4, pp 183-203.

139. Bessen and Meurer, above n 9.

140. Ibid, pp 8-11 and 41-2.

141. Ibid, p 10 and ch 3. Bessen and Meurer discuss arguments that the problem of vague claims would be too expensive and not worth it to fix because most patents have little value and are not asserted; citing D Lichtman ‘Rethinking presecution history estoppel’ (2004) 71(1) U Chi L Rev 151. They conclude that this under estimates the cost of problems relating to the patents consequent inability to effectively execute a notice function, in particular, the costs related to litigation (pp 221-222).

142. Bessen and Meurer, ibid, pp 9-10 and 65-67. Bessen and Meurer argue (pp 223-226) that the core problem does not stem from invalid patents and cannot be solved by more stringent application examination or opposition proceedings, because the determination of validity depends on the way the claims are written and defined or interpreted. Thus, while they see invalid patents as an issue, their thesis is that the main reason the patent system performs poorly is because of the inability of claims to effectively give clear notice as to the boundaries of the property (ie vague claims). They makes proposals as to how one could improve the notice function on patents at ch 11.

143. Ibid, p 62.

144. Ibid, pp 18, 21, 107.

145. Ibid, pp 22 and ch 9.

146. See eg J Leung ‘Patent securitizations, patently bad idea? Risk/benefit approach reveals possible reasons for lack of patent securitizations’ (2006) 25 IPL Newsletter 4; MC Odasso and E Ughetto ‘Patent-backed securities in pharmaceuticals: what determines success or failure’ (2011) 41(3) R&D Management 219; M Ritsch ‘Patent portfolios as securities’ (2013) 63 Duke LJ 89; A Nikolic ‘Securitization of patents and its continued viability in light of the current economic conditions’ (2009) 19(2) Alb LJ Sci & Tech 393.

147. Ritsch, above n 146, pp 92-94; Nikolic, above n 146, pp 412-418. On patent valuation, see WJ Murphy, JL Orcutt and PC Remu Patent Valuation: Improving Decision Making through Analysis (Hoboken, NJ: John Wilye & Sons, 2012).

148. This is less so with copyright works and the securitisation of copyright has been successful. For example, if one were to securitise JK Rowling's next book, one could have a good idea of its market value from the sales of her previous books, because her earlier works are an indicator of quality and their sale represents a degree of loyalty. In contrast, one cannot value a new pain medication based on sales of aspirin, as one can neither know nor predict what share of the pain-medication market will be captured by the new product.

149. See Bessen and Meurer, above n 9, p 177, who note that the connection between the poor manner in which patents give notice and the difficulties involved in valuing patents. Bessen and Meurer further discuss the history of patent markets in the US and point out that from the midnineteenth to the beginning of the twentieth century, there was a market for patents, which disappeared (pp 179-181).

150. Leung, above n 146, p 7.

151. Ibid.

152. Nikolic, above n 146, pp 407,411; Leung, above n 146, p 8. See also Ritsch, above n 146, who argues that we should regulate patent portfolios like securities even when they are not securitised in the traditional sense (ie simply licensed out), as this will make patent-related transactions more transparent.

153. R Dreyfuss and S Frankel ‘From incentive to commodity to asset: how international law is reconceptualizing intellectual property’ (2015) 36 Mich J Int'l L 557.

154. Godt, above n 87, pp 134, 378,446,448-52, notes the conceptual shift from the patent as an instrument to promote innovation, to one that ensures the transferability of information via commodification, to one that protects of investment. She names the defensive use of patents as an example of the instrumentalisation of patents to protect investment (p 451). Godt further asserts that the commodification of information resulting from international patent law and the resultant focus on technology transfer has led to patent law now being about protecting the production process rather than the product itself, and patent law has become the ‘sister to public-international-law investment protection’ (pp 404-1-05).

155. Godt, ibid, p 415 (own translation of ‘Dieser Schutz bezieht sich nicht allein auf die Endproduktmärkte. Der gewerbliche Rechtschutz hat mit seinem Focus auf Investitionsschutz dasselbe Schutzziel wie die internationalen Investitionsschutzabkommen’.)

156. Boehm, above n 47, p 14.

157. See above n 119.

158. Indeed, many post-grant functions of patents are incongruent with a theory that patents are about local working to benefit local society, such as the defensive use of patents to not be sued, or the creation of patent portfolios to wall off a commercial space; see Silbey, above n 45, p 462.

159. Drahos, above n 17.

160. Ibid, p 212, notes that intellectual property historically created ‘a common disadvantage’ through the grant of ‘public privileges’. However, ‘intellectual property rights are no longer thought of in this way … [because] they are continually referred to by the aggregated term of rights. Through that process of reference they have become deeply entrenched in the discourse of private property rights. Their relocation in the language of private property has obscured their origins in public privilege’. In recent years, several superior courts have taken an instrumental approach to restrict patentability. For example, regarding merely isolated genetic sequences, the US Supreme Court stated that ‘“Laws of nature, natural phenomena, and abstract ideas are not patentable.” Mayo 566 US… Without this exception there would be considerable danger that the grant of patents would “tie up” the use of such tools and thereby “inhibit future innovation premised upon them”’. Association for Molecular Pathology v Myriad Genetics (2013) 133 S Ct 2107, 2116, citing its own decision in Mayo v Prometheus (2012) 132 SCt 1289, 1293 and 1301. Similarly, the High Court of Australia stated that, in assessing patentable subject matter, courts should address whether patentability ‘could give rise to a large new field of monopoly protection with potentially negative effects on innovation’, or ‘have a chilling effect on activities beyond those formally the subject of the exclusive rights granted to the patentee’. D'Arcy v Myriad Genetics Inc [2015] HCA 35, [28] French CJ et al. Note, however, that instrumentalism is being used here pre-grant.

161. Ibid, p 220, states that ‘instrumentally based privileges are accompanied by duties that fall on the holder of the privilege. If the purpose in creating the privilege is to fulfil some approved goal then it should also follow that the privilege holder is subject to duties not to exercise the privilege in a way that defeats the purpose for which the privilege was granted in the first place’. Note: In a paper regarding the introduction of commercialisation patents, Sichelman, above n 101, calls obligations to make and sell the patent products affirmative or positive rights. Examples of existing restriction are the exception to infringement for experimental use and regulatory review, and the ability of third parties or the government to obtain compulsory licences in certain circumstances.

162. Ibid, pp 222-223.

163. See above n 161.

164. See Devlin, above n 119.

165. See above n 55.

166. Posner, above n 60.

167. Godt, above n 87, p 449.

168. Where information or knowledge is not further developed because there are too many different owners who can block each other and other potential users; Heller and Eisenberg, above n67.

169. Patent trolling is the practice of taxing third parties for the use of patents that the patent owner does not him/herself use. Lemley has noted the importance of looking at the exact behaviour in individual cases to determine whether there is troll-like behaviour, rather than making deterministic judgements based purely on the entity type; M Lemley ‘Are universities patent trolls?’ (2008) 18 Fordham Intell Prop Media & Ent LJ 611.

170. J Boyle ‘Open source innovation, patent injunctions, and the public interest’ (2012) 11 Duke L & Tech Rev 30, 33, 38, 55 and 61. See also Scherer, above n 75, p 23.

171. There are some means by which we can control or check post-grant behaviour of patent owners, such as compulsory licences, Crown or government use exceptions, experimental or private-use exceptions, requirements for local working and competition law.

172. This is in part due to fact that diagnostic tests have historically not required regulatory approval the way that pharmaceuticals do and the fact that the line between basic and applied research, and invention and innovation, is ill-defined when it comes to certain biotechnologies. See Eisenberg ‘Proprietary rights and the norms of science in biotechnology research’, above n 67, p 195; I Huys, G Matthijs and G Van Overwalle ‘The fate and future of patents on human genes and genetic diagnostic methods’ (2012) 13 Nat Rev 441, 441.