Commercial Success and Patent Standards: Economic Perspectives on Innovation

Abstract

This Article criticizes a recent line of patent decisions in which the Court of Appeals for the Federal Circuit has considered evidence of an innovation's commercial success in deciding whether to award a patent to the inn innovator. Professor Merges briefly reviews the history of patent law and concludes that one of its principle purposes is to reward "invention," or the achievement of a significant technical advance and thereby to spur innovative technological development. He notes, however, that recently, the Federal Circuit has begun to consider "secondary factors," including the financial success of a commercialized invention, and the extent to which other firms have licensed it, in determining whether the invention constitutes a significant technical advance worthy of patent protection. Moreover, he asserts that the Federal Circuit has increased dramatically the importance of these factors by not only giving them substantive weight, but also by reducing evidentiary and procedural obstacles to their use. The Author employs empirical economic research and economic theory to illustrate that this trend is counterproductive. Reliance on secondary factors, he argues, tends to reward nontechnical achievements such as superior distribution systems, marketing decisions, and service networks, instead of rewarding actual invention. As a result, he concludes, the Federal Circuit's decisions may be impairing the patent system by rewarding inventions that are commercially successful but that represent relatively minor technological advances. The Article concludes with some alternative approaches that more appropriately proscribe the use of commercial success and licensing as factors in determining patentability.

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