Patent Costs and Unlicensed Use of Patented Inventions

Abstract

Recent commentators have observed, and sometimes lamented, significant gaps between the formal reach of the patent system and the practical exclusionary effect of patent law. It is costly for technology developers to obtain and assert patents, for technology users to identify the patents they might be infringing and to clear rights, and for the Patent and Trademark Office (PTO) to find patent-defeating prior art The costs of the patent system provide shelter for infringing behavior that might otherwise lead to either licensing or liability, perhaps mitigating excesses in the patent system while retaining strong rights that motivated owners may enforce. But users who rely upon high information costs and transaction costs to protect themselves from patent assertion run the risk of liability when patents fall into the hands of entrepreneurs who figure out cost-reducing strategies to close the gap between the formal reach of patents and the narrower range of activity that has been effectively controlled by prior owners.

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