1. Patent Economics I Class Notes: January 16, 2003 Law 677 | Patent Law | Spring 2003 Professor Wagner

2. 1/16/032 Today’s Agenda 1.The Importance of Economics in Patent Law 2.Basic Patent Economics 3.Some Debates about Patent Economics

3. 1/16/033 Economics and Patent Law Theories of Patent Law Natural Rights / Lockean Labor Theory Utilitarian Theory Article I, § 8, cl. 8: [to] promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.

4. 1/16/034 Economics and Patent Law How (why?) will patents ‘promote progress’? 1.What is it that patents try to stimulate? For now: invention (Why do we want this?) For now: invention (Why do we want this?) 2.How do they do so? Via a ‘right to exclude others’ from the patented invention 3.What are the costs? Monopoly economics: deadweight loss Slower innovation growth: suppression

5. 1/16/035 Economics and Patent Law The Basis of Patent Law: Incentives 1.Incentive to Invent 2.Incentive to Disclose 3.Incentive to Commercialize 4.Incentive to Design-Around 5.Incentive to Invest in R&D

6. 1/16/036 Economics and Patent Law Patents as Property Rights 1.Patents are a form of property right a)Under private control b)Can be bought/sold/licensed/traded/divided, etc. c)Basic enforcement right: injunction 2.Why a property right? a)Are there costs related to the property right? b)Alternatives: 1.Rewards: pay $$ for inventions 2.Funding: subsidize inventive activity 3.Compulsory licensing: case-by-case determinations

7. 1/16/037 Debates over Patent Economics Big question: is the patent system justified?

8. 1/16/038 Debates over Patent Economics The “Strength” of a Patent Grant Generally: patents ≠ economic monopolies In some circumstances, patents = monopolies Must consider the economically-relevant market The Implications of Patent Transfers The importance of licensing and other transactions Considering transaction costs Follow-on innovation, or upstream vs. downstream The Economic Relevance of the Patent Law Itself The patent law shapes behavior in innovation Less attention paid to the role of the doctrine

9. 1/16/039 Debates over Patent Economics Generally, however, at the end of the day, you are left with...

10. 1/16/0310 Next Class The Patent Document I Enablement Enablement Written Description Reading Notes: Read Enzo (supplement) last, and focus on the debates over the disclosure requirement. (Is the Court being consistent?)