1. Patent - strategic thinking Stuart Ritchie stuart.ritchie@pcg.org.uk

2. Patent law - Context Economics  Other areas of IP law. Copyright, trade mark, trade secret  Other areas of law. Contract. Anti-trust/ competition - the “mirror-image” of IP?  Historical consequences of getting it wrong?

3. Social purpose, Public Policy What is the purpose of IP law?  “Increase pace of technical change”  - 1988, US Congress  - policy perspective - innovation  “Protect companies’ investment”  - City of London law firm  - holder/litigant perspective  compatible?

4. Innovation and patent length Some people think that increasing term will increase innovation  Intuitively - maximum innovation means infinite patent  Economic analysis?  “…patent length either too short, or too long, will weaken innovation incentives”  - Horowitz & Lai, Patent Length and the Rate of Innovation, (1996) at 786

5. Is innovation always good? “The patent length that maximises the rate of innovation exceeds that which maximises welfare [social utility]” - Horowitz & Lai, at 794  So: maximizing innovation is bad policy Innovation can be socially wasteful – economically, rent-seeking behaviours – we see this in patent-farming  Intuitively?

6. Patents in practice US patent court reorganization Landes & Posner - statistical analysis – The Economic Structure of IP (2003) “positive and significant impact on the number of patent applications, the number of patents used, the success rate, the amount of patent litigation”...but no increase in innovation activity in the economy

7. Length v scope Historical perspective - trade-off “The socially cost-effective… reward for innovators is to have infinitely-lived patents with the minimum market power to attain the required reward level” - Gilbert & Shapiro, Optimal Patent Length and Breadth (1990) at 107 But… trade secret? Scope more important than length?

8. Should we treat different areas of IP law differently? “The insistence on viewing copyright, patents, and trademarks as protecting distinct social goals…is…simply wrong” - Parchomovsky & Siegelam, Toward an Integrated Theory of IP, (2002) at 1472 complement each other; used together with the same products; can be modelled together;… so should be treated holistically?

9. Patent regime - EU v US “Patents are too costly in Europe” if so, would this even matter? – Test: what trader refuses to enter Europe due to patent regime? Is this even true? – Higher “entry” cost – lower “exit” cost - litigation costs far lower – patent “trolls”, patent farmers in US

10. Anti-trust/competition law mirror image of IP law? Includes contract (eg software licence) But: monopoly or reduced competition not always against public interest – Test: rebuttable presumption that it is? can IP and anti-trust be modelled together? Yes - Gilbert & Shapiro actually do

11. Anti-trust/competition law EU competition law - sledgehammer? Test for abuse of patent? – when a firm can use its monopoly to influence the market price – Klein & Wiley (2002) “Harsh” monopolies can be socially beneficial if very short term cf Schumpeter’s “creative destruction”

12. Anti-trust/competition law Bundling and tying can be in public interest if they eliminate transaction costs (eg music) But this can change quickly. Ipod?

13. Market power and policy Much lobbying activity seeks to maximise both length and scope Could have term of two years? Three? Absurd? Been there. What’s changed? Litigant’s perspective? Should we make policy that: – Ignores innovation research – ignores economic research in general – ignores history

14. Unintended consequences English Civil War “the patents and monopolies, the cloaking of selfish aims beneath verbose platitudes, were an integral part of Stuart government.” – Barry Supple, Commercial Crisis and Change in England 1600-1642, p 227

15. Unintended consequences Boston Tea Party a protest against a tax? Or protest against monopolies? “It was not… the loss of the tea trade… but the principle of monopoly, that stung the merchant class to action… The radicals… by confusing the legal and economic issues, had succeeded in committing… the merchant class to opposition.” - Morrison & Commager, The Growth of the American Republic, vol. 1, p 159.

16. Questions