Are Patents used to Suppress Useful Technology?

This article examines the evidence behind claims that innovation is hindered or blocked (termed technology suppression) by corporations’ use of patents. In other words, are there ways in which the exploitation of the exclusive development right of the patent can be shown to retard the process of innovation, other than in the trivial sense of excluding third parties from the right to develop the technology covered by the patent? There are many references to this possibility in the management, economic and legal literatures, but two papers stand out for grounding their claims of corporate suppression of innovation in the historical record (Dunford 1987; Merges and Nelson 1990). Historical writing is the appropriate form of evidence bearing on how companies have made use of their patents, but this paper shows that in Dunford and Merges and Nelson’s writing the historical evidence has been misinterpreted as providing evidence of technology suppression. What it really reveals are a variety of practical problems in the administration of the patents system as a system of development prospects. In the first sections of this paper the ground is prepared by a brief review of the nature of property rights and the changing view of the function of the patent system in the literature. This argues that the development prospect function of patents must be considered a feature of significant patent development. Then follows a detailed reexamination of the claims for technology suppression in the commonly cited historical cases. These are organised to cover the major ‘development scenarios’ involving: ‘pioneer’, or platform technology patents; multiple, necessary, but independently held patents (eg. radio); the hundreds of minor patents in the so-called ‘patent thicket’.2 The empirical reanalysis confirms that most claims of deliberate corporate technology suppression are the product of a misinterpretation of the evidence. The interpretation that patents have been used to retard technology development is found to have been promoted by a number of features of the literature; 1) the widespread belief, especially amongst economic analysts, that a patent is a form of economic monopoly 2) basic features of property law most pertinent to the function of patents have been forgotten within the contemporary legal literature 3) some of the historical accounts themselves are confused in their use of the term ‘competition’ and in their understanding of patents as property 4) the longstanding, hostile US anti-trust treatment of patents, itself a product of the assumption that patents are conducive to the formation of economic monopoly. Merges and Nelson argue that the cases of radio, the Selden patent, Edison’s carbon filament patent and the Wright brothers’ warped wing patent illustrate the general problem that awarded patent scope tends to be excessively broad. In contradiction to their position, it is shown here that these cases illustrate a range of idiosyncratic problems in the administration of the patent system that generated unusually severe conflicts between awarded scope and technology development. The general problem is not an excessive award of ‘broad scope’, but the ability of Patent Offices and courts to maintain the patent institution as an effective system of development prospects. In particular problem cases, one must consider the reasons why the patent failed to act as a proper development prospect and devise a tailored policy solution with the object of retaining the development prospect function as much as possible. This revision therefore reinforces an understanding of the patent system as a system of property rights that in principle, and usually in practice, is an effective social device to aid the exploration and exploitation of novel technical ideas (inventions).