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“Patent law is often accused of being too complex, changeable, vague, costly, ineffective and subject to abuse,” says John W. Schlicher — a legal economist, noted chemist and partner at Silicon Valley-based law firm Gray Cary Ware & Friedenrich — in his paper “Does Patent Law Make Sense? The Relationship Between Patent Policies and Patent Statutes and Decisions.” Patent law reflects a number of distinct goals — simplicity, accuracy, reliability, low implementation cost and consumer welfare. These goals, Schlicher explains, are often in conflict: “Patent law is difficult to design because almost every important doctrine involves some trade-offs among these goals, and it is difficult to assess how much we lose in one area to achieve some gain in another.” Implicitly reasoning that the goal of consumer welfare is the wellspring of the other four goals, Schlicher focuses on how patent law makes consumers better off. He identifies two theories — the incentive-to-invent theory and the quid-pro-quo theory. According to the incentive to invent theory, the purpose of patent law is to raise the value of inventions to inventors so that it matches the value of inventions to society. In the absence of patent law, discoverable inventions would be freely available to anyone who wanted to use them. Since the inventors would not be able to capture the value of their inventions, far fewer would be made and society would be worse off. The quid pro quo theory also says the patent system provides an incentive, not to invent, but to disclose inventions. The theory apparently assumes that inventors can obtain sufficient value from inventions by keeping them secret. Patent law induces these inventors to disclose inventions in patents, so that the public will be able to use them freely when the patents expire. Schlicher sees a basic problem with the quid pro quo theory. Inventors are willing to disclose their inventions in exchange for a patent only when the value of the patent exceeds the value of the trade secret. In other words, the government always seems to make a bad deal for the public because it offers (but does not compel anyone to accept) a limited period of exclusive rights in exchange for disclosure. The only inventors who will accept the offer are those who believe their inventions will be made public (by them or someone else) before a patent term would end. The net effect of the patent grant, therefore, is always to prolong the period of exclusive use, and never to reduce it. Schlicher therefore favors the incentive theory, although he never explicitly says so. He also never explicitly considers how the problem with the quid pro quo theory disappears if both theories are at work — even if quid pro quo constitutes 99 percent of the true basis for the patent system. As long as society obtains some small benefit in addition to the disclosure of the invention, it is logically possible that quid pro quo can suffice as the raison d’�tre of the system. (I do not in fact believe that the quid pro quo theory is as important as the incentive theory. As noted in a previous article, Gregory Aharonian’s finding that fewer than 1 percent of articles in technical journals cite patents undermines the importance of the quid pro quo theory.) In the remainder of the paper, Schlicher reviews specific patent law doctrines and finds that many of them embody one theory or the other, or both in varying proportions. He examines patentable subject matter, utility, novelty, obviousness, priority, the on-sale bar, claim scope, 35 U.S.C. 112, the pioneer doctrine, means-plus-function claims, infringement, damages, inequitable conduct and the prevalence of litigation. The paper is dense and does not lend itself to summarization. As examples of his modus operandi, however, let us look at his review of two patent law doctrines. UTILITY The quid pro quo theory suggests a broader role for the utility requirement, Schlicher says: “If the goal is to obtain disclosure of a product valuable to consumers when the term ends, there seems to be more reason to insist on some showing of value to consumers.” Under an incentive theory, however, “it is difficult to assign a sensible role to a test of usefulness … [After all,] inventors have no incentive to produce useless information.” As long as the inventor bears the administrative cost of the patent system (e.g., through filing and maintenance fees), then there is no reason to forbid a patent for a useless invention. A utility requirement is also unwise because of the inherent impossibility of predicting with certainty what inventions will be useful in the future. CLAIM SCOPE The incentive theory requires that claim boundaries are clear, Schlicher says, but it also requires that they have the proper breadth. “[T]he system is aided by precise, clear, cheaply ascertainable boundaries, and by protecting the invention made and described, and only that invention.” Thus, even if a patent’s claims are definite, the claim scope may be held not to encompass products within a reasonable interpretation of the claims. The courts have the discretion to balance the competing policies and to construe the claims more narrowly than they appear or more broadly than they appear. However, “[t]he law has had unnecessary conceptual difficulty dealing with this approach by creating distinctions between literal infringement and the doctrine of equivalents, and developing different and complex standards for deciding each issue.” The touchstone under an incentive theory, Schlicher says, is whether the accused device could be designed based on the information described in the patent at no cost and risk, or perhaps even at very low cost and risk. If so, then the accused device captures part of the value of the invention, and should be deemed to be covered by the patent. To quote Schlicher: “Many of the factors considered by the courts to construe claims or determine the scope of the rights are explained by this view. The courts decided the scope of the rights in a particular patent using various legal formulas to reach implicit conclusions reached about the cost of designing the accused device based upon the information described in the patent compared to the cost of designing that device from information in the prior art.” A copy of the paper — which was presented to the IP section of the ABA in Washington, D.C. on April 13, 1999 — may be obtained from John Schlicher by e-mailing him at [email protected]. A much fuller account is presented in his penetrating book, “Patent Law: Legal and Economic Principles” (West 1992, updated annually). Samson Vermont is a co-editor-in-chief of Patent Strategy & Management and a patent attorney with the Washington, D.C., IP law firm of Stevens Davis Miller & Mosher LLP. He may be contacted at [email protected].

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