The research project deals with balance in patent system in respect to cumulative innovation: to what extent and how private and compulsory liability rules can introduce openness into the patent system and resolve market failures stemming from overprotection?
Last Update: 09.02.16
The project combines insights from law and economics to resolve internationally relevant problems of overprotection in patent law that hinder cumulative innovation in complex industries: the strong emphasis of property rule, anti-commons problems and strategic behavior pose hold-up threats. These problems aggravate in the context of complex cumulative technologies. An injunction to protect a single patent may take a product incorporating thousands of patents off the market.
The first objective of the project is to investigate how open innovation, in particular in the form of private liability rules, could resolve the problems of overprotection without governmental intervention. The preliminary results support the initial hypothesis that while open innovation may resolve some of the anti-commons problems, the incentives to engage license openly are not sufficient to mitigate hold-up risks and strategic refusals to license encumbering cumulative innovation.
The same patent can be exercised both in accordance to the objectives of patent protection and as well as strategically, in a manner that hinders cumulative innovation and has negative effects on social welfare. In comparison to exclusions and limitations of patent protection, the case-specifically applied compulsory liability rules appear to be better to address such problems of hindering cumulative innovation. However, the international framework for compulsory licenses in patent law, established by Art. 5 (A) of Paris Convention and Art. 31 TRIPS, have not been drafted to address modern challenges of cumulative innovation: The requirement of previous attempt to get a license makes the instrument inapplicable to situations where a subsequent innovator becomes aware of infringement after investing in the innovation. Also the strict procedural rules make the instrument unappealing to resolve problems of overprotection.
Case law on abuse of dominance (Art. 102 TFEU) in respect to refusals to license and standard essential patents addresses interests of subsequent innovator more directly. Yet, finding market power and abuse of dominance in respect to a fragment of complex cumulative technology is unlikely. In contrast, the Huawei decision establishing criteria of enforcing standard essential patents appears to be balanced in regard to subsequent innovator’s interests and to alleviate hold-up situations.
Currently, different compulsory liability rules depending on whether the patent at hand is normal or belong to a de facto or de jure standard. The instruments in patent law in particular are not well tailored to address hold-up situations. A normative recommendation would be to establish a “one-stop-shop” compulsory licensing mechanism in the context of patent law.
Alina Wernick
Dr. Sylvie Nérisson
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