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Prior User Rights

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  • Carl Shapiro

Abstract

Keywords: patents, innovation, oligopoly JEL codes: L13, O31. ABSTRACT: Many inventions, great and small, are discovered independently at roughly the same time by two or more individuals or organizations. Famous examples include the light bulb (Edison and Swan), the telephone (Bell and Gray), and the integrated circuit (Kilby and Noyce). Such independent invention is common for minor technological improvements. How should property rights to an invention be defined and awarded in such cases? Patent law has struggled with this question for many years. The basic rule in the U.S. is that the patent is awarded to the first firm to invent; later independent inventors come up empty-handed. However, this basic system can create some peculiar results. Suppose that Firm A achieves an invention and files for a patent. Slightly later, but before the invention is made public, Firm B independently discovers the same invention. Firm A receives the patent and can even prevent Firm B from practicing its own invention. In legal terms, a party accused of patent infringement cannot defend itself by showing that it discovered the same invention independently. Would such an independent invention defense be desirable? Alternatively, suppose that Firm A achieves an invention, but decides not to file for a patent, perhaps because Firm A does not believe this invention is sufficiently novel and non-obvious to be patentable. Instead, Firm A uses the invention internally in its own operations as a trade secret. Later, Firm B independently discovers the same invention and files for a patent. Under current U.S. patent law, Firm B is awarded the patent because Firm A kept its invention secret.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Carl Shapiro, 2006. "Prior User Rights," American Economic Review, American Economic Association, vol. 96(2), pages 92-96, May.
    • Handle: RePEc:aea:aecrev:v:96:y:2006:i:2:p:92-96
    Note: DOI: 10.1257/000282806777211865
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    References listed on IDEAS

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    1. Cabral, Luis, 1994. "Bias in market R&D portfolios," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 533-547, December.
    2. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
    3. Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-595, September.
    4. Scotchmer, suzanne, 1998. "The Independent-Invention Defense in Intellectual Property," Berkeley Olin Program in Law & Economics, Working Paper Series qt2s5174q8, Berkeley Olin Program in Law & Economics.
    5. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    6. F. M. Scherer, 2005. "Patents," Books, Edward Elgar Publishing, number 3903.
    7. Vincenzo Denicolò & Luigi Alberto Franzoni, 2004. "Patents, Secrets, and the First‐Inventor Defense," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 517-538, September.
    8. repec:bla:econom:v:69:y:2002:i:276:p:535-47 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Jay Pil Choi & Heiko Gerlach, 2017. "A Theory of Patent Portfolios," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 315-351, February.
    2. Ponce, Carlos J., 2007. "More secrecy... more knowledge disclosure? : On disclosure outside of patents," UC3M Working papers. Economics we077241, Universidad Carlos III de Madrid. Departamento de Economía.
    3. repec:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8gjo2i2i is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8gjo2i2i is not listed on IDEAS
    5. Emeric Henry, 2010. "Runner‐up Patents: Is Monopoly Inevitable?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 417-440, June.
    6. Zhang, Tianle, 2012. "Patenting in the shadow of independent discoveries by rivals," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 41-49.
    7. ICHIDA Toshihiro, 2013. "Imitation versus Innovation Costs: Patent policies under common patent length," Discussion papers 13054, Research Institute of Economy, Trade and Industry (RIETI).
    8. Jay Pil Choi & Heiko Gerlach, 2014. "Selection Biases in Complementary R&D Projects," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 899-924, December.
    9. Banerjee, Dyuti & Chatterjee, Ishita, 2010. "The impact of piracy on innovation in the presence of technological and market uncertainty," Information Economics and Policy, Elsevier, vol. 22(4), pages 391-397, December.
    10. Cugno Franco & Ottoz Elisabetta, 2006. "Static Inefficiency of Compulsory Licensing: Quantity vs. Price Competition," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200606, University of Turin.
    11. Paul Belleflamme & Paul Bloch, 2013. "Dynamic Protection of Innovations through Patents and Trade Secrets," CESifo Working Paper Series 4486, CESifo.
    12. Emeric Henry, 2010. "Runner‐up Patents: Is Monopoly Inevitable?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 417-440, June.
    13. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g8gjo2i2i is not listed on IDEAS
    14. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8gjo2i2i is not listed on IDEAS
    15. da Ponte, Aureliano & Leon, Gonzalo & Alvarez, Isabel, 2023. "Technological sovereignty of the EU in advanced 5G mobile communications: An empirical approach," Telecommunications Policy, Elsevier, vol. 47(1).
    16. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.

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    More about this item

    Keywords

    patents; innovation; oligopoly jel codes: l13; o31. abstract: many inventions; great and small; are discovered independently at roughly the same time by two or more individuals or organizations. famous examples include the light bulb (edison and swan); the telephone (bell and gray); and the integrated circuit (kilby and noyce). such independent invention is common for minor technological improvements. how should property rights to an invention be defined and awarded in such cases? patent law has struggled with this question for many years. the basic rule in the u.s. is that the patent is awarded to the first firm to invent; later independent inventors come up empty-handed. however; this basic system can create some peculiar results. suppose that firm a achieves an invention and files for a patent. slightly later; but before the invention is made public; firm b independently discovers the same invention. firm a receives the patent and can even prevent firm b from practicing its own invention. in legal terms; a party accused of patent infringement cannot defend itself by showing that it discovered the same invention independently. would such an independent invention defense be desirable? alternatively; suppose that firm a achieves an invention; but decides not to file for a patent; perhaps because firm a does not believe this invention is sufficiently novel and non-obvious to be patentable. instead; firm a uses the invention internally in its own operations as a trade secret. later; firm b independently discovers the same invention and files for a patent. under current u.s. patent law; firm b is awarded the patent because firm a kept its invention secret.
    (this abstract was borrowed from another version of this item.)    ;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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