1997 B.C. Intell. Prop. & Tech. F. 011001
Devil's Advocate: Are Patents Really Monopolies?

by Keith Wood, Staff Writer

Lawyers commonly think of a patent as a short-term monopoly over an invention, granted in order to encourage disclosure of useful knowledge. But Judge Frank H. Easterbrook asks us to reconsider: a patent is not a monopoly - at least not one which prevents competition. Judge Frank H. Easterbrook, Intellectual Property is still Property, 13 Harv. J.L. & Pub. Pol'y 108, 108 (1990).

Easterbrook's key observation may at first seem clear to those acquainted with patent law: a patent is a right to exclude. But such a right does not necessarily create a monopoly over a market. People other than the inventor can compete with a patented product; they need only use products based on different ideas. Thus a patent behaves like a grant of real property, in that the owner of a house may exclude others from using it, but he certainly does not have a monopoly over the real estate market.

The distinction may seem academic, but Easterbrook cites a case which was crucially influenced by the assumption that a patent is a monopoly. Id. at 115. In Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 109 S. Ct. 971 (1989), the Supreme Court found that a Florida law preventing copying of boat hulls by moulding was unconstitutional. The court argued that the Florida law granted a monopoly, just as a patent would, and that this was unnecessary because the hull was unpatentable and thus available to the public. 13 Harv. J.L. & Pub. Pol'y supra, at 117. Easterbrook, however, believes that the Florida law did not provide monopoly profits, and that like trade secret law such laws should be allowed to co-exist with Federal law.

Distinguishing patents from monopolies forces us to think more carefully about their nature. When we limit the time for which a patent is granted, we are not establishing the time at which monopoly will end and competition will begin - for competition goes on even while a patent is pending. Rather, we are balancing "dynamic gains in exchange for allocative losses." Id. at 110. That is, we are setting the time at which the inventor will no longer be able to demand a price in excess of the zero marginal cost of his intellectual property. Id. at 110.

Thus, we need not think of the Patent and Trademark Office as granting monopolies; rather, it is granting a special kind of property right.

Acknowledgement: The idea for this article was sparked by Mark Schultz, "Recent Developments," in Intellectual Property News, Fall 1996, Vol.1, No. 1, pg. 11, published by the E.L. Wiegand Practice Groups of the Federalist Society.

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