Un-unified economic theories of patents - The not-quite-holy grail

Notre Dame Law Review

Volumn 71, Issue 2, 1996, Pages 267-327

  Oddi, A Samuel ^a  

^a NORTHERN ILLINOIS UNIVERSITY   (United States)

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EID: 21344438281     PISSN: 07453515     EISSN: None     Source Type: Journal    
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References (416)

1. STEVEN W. HAWKING, A BRIEF HISTORY OF TIME 10 (1988). While the book was a best seller, it probably was not one of the best read books. "Something like 5.5 million copies sold made Hawking's A Brief History of Time a runaway best seller that very few buyers actually read. And no wonder. It was all but impenetrable to anyone but a physicist."
2. Clarence Petersen, Tribune Books, CHI. TRIB., Aug. 9, 1992, at C2;
3. see also LEON M. LEDERMAN & DICK TERESI, THE GOD PARTICLE (1993);
4. STEVEN WEINBERG, DREAMS OF A FINAL THEORY (1993).
5. LEDERMAN & TERESI, supra note 1, at 348. A decade earlier John Gribbin reflected the same metaphor: "[T]he Holy Grail of physicists today is a true unification of [general relativity and quantum mechanics] into one grand theory." JOHN GRIBBIN, IN SEARCH OF SCHRODINGER'S CAT: QUANTUM PHYSICS AND REALITY 175 (1984).
6. HAWKING, supra note 1, at 11-12.
7. Id. at 11.
8. Id.
9. The theories may be morally or justice based or, more recently, economically based. The description has generally been in support of or in opposition to the patent system. The various classical theories of patents are described and critiqued in EDITH TILTON PENROSE, THE ECONOMICS OF THE INTERNATIONAL PATENT SYSTEM (1951); STAFF OF SENATE SUBCOMM. ON PATENTS, TRADEMARKS AND COPYRIGHTS, 85TH CONG., 2D SESS., AN ECONOMIC REVIEW OF THE PATENT SYSTEM, STUDYNO. 15 (COMM. PRINT 1958) (F. Machlup, auth.) [hereinafter Machlup]. Steven Cheung summarizes the views of influential economic analysts: One view - advanced by Bentham (1795) and shared by Say (1803), Mill (1848), and Clark (1907) - holds that patent rights are absolutely necessary to encourage inventions. A second view, advanced by Taussig (1915) and shared by Pigou (1920), maintains that a system of patent rights is largely superfluous. Third, Plant (1934), with modern followers, argued that a patent system is actually detrimental. Finally, Arrow (1962), . . . argued that although property rights in ideas are clearly useful, they are nonetheless inferior to direct government investment in inventive activities.
10. Steven N.S. Cheung, Property Rights and Invention, in 8 RESEARCH IN LAW AND ECONOMICS 5, 5-6 (John Palmer & Richard O. Zerbe, Jr. eds., 1986).
11. See generally JOHN W. SCHLICHER, PATENT LAW LEGAL AND ECONOMIC PRINCIPLES ch. 2 (1993);
12. K.W. Dam, The Economic Underpinnings of Patent Law, 23 J. LEGAL STUD. 247 (1994). Other literature relating to the economics of the patent system will be cited infra at appropriate points.
13. Mark F. Grady & Jay I. Alexander, Patent Law and Rent Dissipation, 78 VA. L. REV. 305 (1992);
14. Kevin Rhodes, Comment, The Federal Circuit's Patent Nonobvious Standards: Theoretical Perspectives on Recent Doctrinal Changes, 85 Nw. U. L. REV. 1051 (1991).
15. See LEDERMAN & TERESI, supra note 1, at 102-03, 154-75.
16. See PENROSE, supra note 6, at 21-31; Machlup, supra note 6, at 21-24. See infra text accompanying notes 4648. The reward theory also has an economic basis. See WARD S. BOWMAN JR., PATENT ANTITRUST LAW: A LEGAL AND ECONOMIC APPRAISAL 30-32, 38-40 (1971)
17. (citing FRANK H. KNIGHT, RISK, UNCERTAINTY AND PROFIT (1957);
18. An Answer to, Is Group Choice a Part of Economics?, 67 Q.J. ECON. 608 (1953)); infra text accompanying notes 49-60.
19. See FREDERIC M. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE ch. 16 (2d ed. 1980) [hereinafter SCHERER, INDUSTRIAL];
20. Alfred E. Kahn, The Role of Patents, in Competition, Cartels and Their Regulation 308 (John P. Miller ed., 1962);
21. Douglas F. Greer, The Case Against Patent Systems in Less-Developed Countries, 8 J. INT'L L. & ECON. 223 (1973);
22. A. Samuel Oddi, Beyond Obviousness: Invention Protection in the Twenty-First Century, 38 Am. U. L. REV. 1097, 1101-02, 1114-16 (1989)
23. [hereinafter Oddi, Beyond Obviousness];
24. A. Samuel Oddi, An Uneasier Case for Copyright than for Patent Protection of Computer Programs, 72 NEB. L. REV. 351 (1993) [hereinafter Oddi, Uneasier Case];
25. A. Samuel Oddi, The International Patent System and Third World Development: Reality or Myth? 1987 DUKE L.J. 831
26. [hereinafter Oddi, International Patent System].
27. Edmund W. Kitch, The Nature and Function of the Patent System, 20 J.L. & ECON. 265 (1977)
28. [hereinafter Kitch, Nature and Function].
29. See Roger L. Beck, The Prospect Theory of the Patent System and Unproductive Competition, in 5 RESEARCH IN LAW AND ECONOMICS 193 (Richard O. Zerbe, Jr. ed., 1983); Grady & Alexander, supra note 7, at 313-16;
30. Donald G. McFetridge & Douglas A. Smith, Patents, Prospects, and Economic Surplus: A Comment, 23 J.L. & ECON. 197 (1980);
31. Oddi, Beyond Obviousness, supra note 10, at 1110-12;
32. SCHERER, INDUSTRIAL, supra note 10, at 476-77 & n. 3 (citing Robert J. Gordon, The Incidence of the Corporation Income Tax, 57 AM. ECON. REV. 751 (1967)).
33. Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 COLUM. L. REV. 839 (1990);
34. see also Robert P. Merges, Commercial Success and Patent Standards: Economic Perspectives on Innovation, 76 CAL. L. REV. 803 (1988).
35. Grady & Alexander, supra note 7; Rhodes, supra note 7. On rent theory generally, see TOWARD A THEORY OF THE RENT-SEEKING SOCIETY (James M. Buchanan et al. eds., 1980) (considering the theory, measurement and applications of rent-seeking). Judge Posner defines "rent-seeking" as "the incentive to overproduce goods that promise a return greater than the cost of production (that is, an economic 'rent'), and to the resulting waste when rents are transformed, through competition to obtain them, into costs."
36. RICHARD A. POSNER, LAW AND LITERATURE 342 (1988);
37. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 37-38 (4d ed. 1992) (analyzing the costs of such behavior)
38. [hereinafter POSNER, ECONOMIC ANALYSIS].
39. Grady and Alexander indicate a third possible source of rent dissipation due to maintaining the secrecy of inventions rather than relying upon the patent system for protection. Grady & Alexander, supra note 7, at 308-09. Economists employ the term "innovation" to define the technological developments that follow from a basic invention and that are actually commercialized: The terms "invention" and "innovation" suggest the conceptual formulations of Abbott Payson Usher and Joseph A. Schumpeter. Crucial to Usher's conception of invention is an "act of insight" going beyond the exercise of normal technical skill, even though additional activities (perception of a problem, setting the stage, and critical revision) are also recognized. Schumpeter, on the other hand, defined innovation as "the carrying out of new combinations." For the case of new technology this can be identified with reducing an invention to practice and exploiting it commercially. FREDERIC M. SCHERER, INNOVATION AND GROWTH 8 (1984) (footnotes omitted). Patent attorneys, however, tend to talk in terms of improvement inventions or patents, which improve upon a basic invention or patent. For the purposes of this Article, the terms innovation and improvement invention or patent will be used interchangeably, with the understanding that the improvement invention or patent has been commercialized.
40. Grady & Alexander, supra note 7, at 309.
41. See HAWKING, supra note 1, at 10, 13.
42. Machlup concludes from his study: If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible on the basis of our present knowledge, to recommend abolishing it. Machlup, supra note 6, at 80; see also Oddi, International Patent System, supra note 10, at 832 n.2 (collecting studies). Indeed, Grady and Alexander state that "rent dissipation would be a much smaller problem" if there were no patent system, but that the nature of their theory permits them "to be agnostic about whether patent rewards are a good idea." Grady & Alexander, supra note 7, at 309-10; see also id. at 317.
43. HAWKING, supra note 1, at 55-61. Upon learning of the inherent randomness of quantum mechanics, Albert Einstein expressed his objection: "God does not play dice." Id. at 56; see also LEDERMAN, supra note 1, at 175-88.
44. See WEINBERG, supra note 1, at 4-6 (discussing importance of the Supercollider and its importance to finding a unifying theory); see also LEDERAIAN, supra note 1, at 378-81. Congress terminated the Supercollider project in October, 1993, rendering a severe blow to the advancement of particle physics. E. Michael Myers, Burial Services for Texas Supercollider, UPI, Oct. 26, 1993, available in WESTLAW, UPI database. Nonetheless, evidence of the elusive "top" quark was reported by physicists working at Fermi National Accelerator Laboratory in April, 1994. The top quark, along with the up, down, charm, stranger and bottom quarks, constitute the basic building blocks of matter according to the Standard model.
45. J. Madeleine Nash, Gotcha!, TIME, May 9, 1994, at 69;
46. Fermilab Finds Evidence of Elusive Top Quark, NUCLEAR NEWS, June 1994, at 74;
47. cf. George L. Priest, What Economists Can Tell Lawyers About Intellectual Property: Comment on Cheung, in 8 RESEARCH IN LAW AND ECONOMICS 19, 19 (John Palmer & Richard O. Zerbe, Jr. eds., 1986) ("The ratio of empirical demonstration to assumption in [patent economic] literature must be very close to zero.").
48. 35 U.S.C. §§ 1-376 (1988 & Supp. V 1993).
49. 35 U.S.C. §101 (1988 & Supp. V 1993) provides: "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title."
50. The conditions for protection are defined in 35 U.S.C. §§ 102 & 103 (1988) (quoted infra notes 256, 286, respectively).
51. The conduct that constitutes infringement is specified in 35 U.S.C. § 271 (quoted infra notes 239, 313, 316, 336, 337, 340).
52. See Oddi, Beyond Obviousness, supra note 10, at 1117-20; infra text accompanying notes 249-55 (further discussing the impact of narrow construction of 35 U.S.C. § 101 on basic inventions).
53. 35 U.S.C. § 102 (quoted infra note 256).
54. 35 U.S.C. § 103 (quoted infra note 286).
55. Section 112 imposes the "enabling" requirement of disclosure: The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
56. U.S.C. § 112 (1988 & Supp. V 1993).
57. See infra text accompanying notes 314-29 (discussing literal infringement).
58. See infra text accompanying notes 330-35 (discussing doctrine of equivalents).
59. 35 U.S.C. § 271 (c) (quoted infra note 337).
60. 35 U.S.C. § 271 (b) (quoted infra note 336).
61. See PENROSE, supra note 6, at 19-26; Machlup, supra note 6, at 21-22.
62. See PENROSE, supra note 6, at 26-31; Machlup, supra note 6, at 21, 23.
63. See PENROSE, supra note 6, at 21; Machlup, supra note 6, at 22.
64. This thesis is expressly adapted in the preamble of the French Patent statute of 1791: That every novel idea whose realization or development can become useful to society belong primarily to him who conceived it, and that it would be violation of the rights of man in their very essence if an industrial invention were not regarded as the property of its creator. Quoted in Machlup, supra note 6, at 22.
65. "The natural law tradition is not one that has generated much enthusiasm in the contemporary world outside of Roman Catholic circles." GEORGE C. CHRISTIE, JURISPRUDENCE 78 (1973).
66. See infra text accompanying notes 45-63.
67. See PENROSE, supra note 6, at 26; Machlup, supra note 6, at 23.
68. See PENROSE, supra note 6, at 31-34; Machlup, supra note 6, at 21, 24-25.
69. See PENROSE, supra note 6, at 34-39; Machlup, supra note 6, at 21, 23-24.
70. See infra notes accompanying notes 64-90.
71. See SCHERER, INDUSTRIAL, supra note 10, at 443 (emphasis added): [E]xcept when innovators' profits come largely from cannibalization of the profits that would otherwise be enjoyed by the producers of substitute products, it is likely that society as a whole (i.e., including both consumers and producers) gains from inventions and innovations induced or hastened by the grant of patent rights. Id.; see also Greer, supra note 10, at 224 ("Nevertheless, it can be formally demonstrated that the economic benefits of such inventions (in the form of production cost saving or new product consumption utilities) always exceed those social costs to yield a net social benefit.") (footnotes omitted); KAHN, supra note 10, at 311 ("So long as the innovation would not have been forthcoming without the patent, this social cost must always be less than the benefit; but of course the converse is equally true.").
72. In addition, under rent dissipation theory, rent may be dissipated by reliance upon secrecy rather than on patents. See Grady & Alexander, supra note 7, at 305-08, 342.
73. See PENROSE, supra note 6, at 22.
74. Id.
75. "One man may spend his life developing a great idea for which society is not ready; another may perfect a bright idea in an evening for a clever gadget which society is willing to buy in large quantities and pay millions of dollars for." Id. at 30-31.
76. BOWMAN, supra note 9, at 32.
77. Id. at 34.
78. Id. at 38, 47.
79. Kitch, Nature and Function, supra note 11, at 266.
80. Id.
81. Id. at 274.
82. Id.
83. See infra text accompanying notes 91-103.
84. Rhodes, supra note 7, at 1053.
85. Id. In Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966), the seminal case interpreting the nonobviousness standard of "invention" under 35 U.S.C. § 103, the Court stated: "Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy." The so-called synergism requirement was later applied by the Supreme Court as a gloss on the nonobviousness standard of § 103 in two cases involving combination patents - Anderson's-Black Rock, Inc. v. Pavement Salvage Co., 396 U.S. 57 (1969) (the combination of mounting a radiant heater in a conventional asphalt paving machine) and Sakraida v. Ag Pro, Inc., 425 U.S. 273 (1976) (combination of old elements for flushing manure from a barn floor). In Sakraida, the Court concluded: "We cannot agree that the combination of these old elements to produce an abrupt release of water directly on the bam floor from storage tanks or pools can properly be characterized as synergistic," that is, 'result[ing] in an effect greater than the sum of the several effects taken separately.'" Id. at 282 (quoting Anderson's-Black Rock, 396 U.S. at 61). In neither case did the commercial success of the inventions convince the Court of their nonobviousness.
86. Rhodes, supra note 7, at 1080.
87. Id. at 1094-95. In Chore-Time Equip., Inc. v. Cumberland Corp., 713 F.2d 774, 781 (Fed. Cir. 1983), the court considered a synergism request "unnecessary and confusing." In Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983), the court indicated there was no separate category of "combination patents." Id. at 1540. In addition, the court suggested that district courts must take into account secondary considerations on the issues of nonobviousness. Id. at 1538-39.
88. Grady & Alexander, supra note 7, at 309-10.
89. Id. at 312. They elevate what is called the patent-induced theory here to the "strong version" of the reward theory. "The strong version of reward theory, as advanced in the works of Frederic Scherer and, more recently, A. Samuel Oddi, posits that rewards should explain actual patent decisions." Grady & Alexander, supra note 7, at 312-13 (notes omitted). This usage is questioned, as is the assertion that the patent-induced theory has been advanced to "explain actual patent decisions."
90. Grady & Alexander, supra note 7, at 326-27.
91. See infra text accompanying notes 114-28.
92. See supra note 43.
93. "Induced" is used in a broad sense to indicate that the patent system may induce inventions at all stages of the creative process, from conception through improvement (commercialization) and related applications and by providing an alternative to protection by secrecy. See Oddi, Uneasier Case, supra note 10, at 374-75.
94. See SCHERER, INDUSTRIAL, supra note 10, at 44447.
95. In this context, the patent-induced theory would be better characterized as the "narrow version" of the reward theory rather than the "strong version."
96. 383 U.S. 1 (1965).
97. Id. at 11.
98. In Roberts v. Sears, Roebuck & Co., 723 F.2d 1324 (7th Cir. 1983) (en bane), Judge Posner was unable to convince the full court to vigorously apply the patent-induced rationale of Graham. The court, rehearing this case en banc, refused to hold Roberts' patent on a "quick release socket wrench" invalid as a matter of law, as Judge Posner had in his opinion in the original appeal. 697 F.2d 796 (7th Cir. 1983), vacated and reh'g granted, 723 F.2d 1324 (7th Cir. 1983). Instead, the full court remanded for a new trial because the jury had been permitted to be the final arbiter of obviousness. In his concurring and dissenting opinion, Judge Posner concluded that the standard for obviousness should be: "[I]f a court thinks an invention for which a patent is being sought would have been made as soon or almost as soon as it was made even if there were no patent laws, then it must pronounce the invention obvious and the patent invalid." Roberts, 723 F.2d at 1346 (Posner, J., concurring and dissenting). He later commented: "I know that many lawyers and judges find the language of economics repulsive. Yet the policies that have given shape to the patent statute are quintessentially economic, and the language of economics is therefore the natural language in which to articulate the test for obviousness." Id. at 1347.
99. In Graham, the determination of whether an invention is obvious is made by determining the scope and content of the prior art, ascertaining differences between the prior art and the claims at issue, and resolving the level of ordinary skill in the art. Graham, 383 U.S. at 17. The economic logic is that, if the obviousness standard provides a suitable "weeding" mechanism for identifying those inventions that the public would have received without the patent incentive, society will not have to bear the costs of noninduced patents. See infra text accompanying notes 287-305 (further discussing Graham).
100. SCHERER, INDUSTRIAL, supra note 10, at 443-50.
101. As stated by Scherer. [I]t is conceivable that without a patent system certain spectacular technical contributions - those effecting a genuine revolution in production or consumption patterns - might be lost or (more plausibly) seriously delayed because their support lends itself poorly to rational benefit/cost calculation. Such innovations may lie off the beaten paths of industrial technology, where no firm or group of companies has a natural advantage; and the innovator may be forced to develop completely new marketing channels and production facilities to exploit them. They may entail greater technological and market uncertainties, higher development costs, and longer inception-to-commercialization lags than the vast bulk of all industrial innovation. Id. at 448. Scherer would categorize black and white television and xerography as revolutionary. Id. To these may be added numerous other inventions, including, but obviously not limited to, the airplane, antibiotics, instant photography, lasers, synthetic textiles, tranquilizers, sulfonamides, telegraph, telephone, and transistors. See S. GEE, TECHNOLOGY TRANSFER, INNOVATION, AND INTERNATIONAL COMPETITION 161 (1981);
102. UNITED STATES PATENT OFFICE, REVOLUTIONARY IDEAS - PATENTS & PROGRESS IN AMERICA (1976).
103. SCHERER, INDUSTRIAL, supra note 10, at 448.
104. Id.
105. Id. at 443-48.
106. Id. at 444-46; see also Oddi, International Patent System, supra note 10, at 838-39; Oddi, Beyond Obviousness, supra note 10, at 1114-16. Classic examples of high benefit/cost inventions may include: the pencil with eraser attached (see Reckendorfer v. Faber, 92 U.S. 347 (1876), and Rubbertip Pencil Co. v. Howard, 87 U.S. (20 Wall.) 498 (1874) (discussed infra text accompanying notes 191-96)); the "quick release socket wrench" (see Roberts v. Sears, Roebuck & Co., 723 F.2d 1324 (7th Cir. 1983) (en bane) (discussed supra note 70 and infra note 247)).
107. See Oddi, Beyond Obviousness, supranote 10, at 1115-16 & n.113 (giving examples of serendipitous inventions, including x-rays, penicillin, vulcanization of rubber, dynamite, and TEFLON).
108. SCHERER, INDUSTRIAL, supra note 10, at 448. Examples of low benefit/cost inventions may be another mousetrap, can opener, or bottle cap.
109. Id. Scherer concludes that society would lose little if such inventions were not created because of the elimination of the patent system. Id. But see Kitch, Nature and Function, supra note 11, at 289 (considering such low benefit/cost inventions to be the important class, concluding that if the prospect function is taken into account, patents that have little value to their owners may still perform useful social functions). The rent dissipation theory may have led Grady and Alexander to the same conclusion - that patents having little value but signalling improvements are the most likely to be protected. Grady & Alexander, supra note 7, at 320.
110. Oddi, Beyond Obviousness, supra note 10.
111. Id. at 1117-20, 1127-30.
112. Id. at 1131-37.
113. BOWMAN, supra note 9, at 39-42; Kitch, Nature and Function, supra note 11, at 280-82; Grady & Alexander, supra note 7, at 312-14.
114. BOWMAN, supra note 9, at 41.
115. Bowman illustrates the difficulty of "cost finding" in the creation of invention by the TEFLON example. BOWMAN, supra note 9, at 39 n.8. TEFLON was accidentally discovered, was admittedly nonobvious and reaped a huge reward for Du Pont Thus, it may be clear that the invention of TEFLON was not patent-induced; however, was its commercialization induced by the patent system or the market? Would Du Pont have abandoned further work on TEFLON if it could not have gotten a patent? Would it have relied upon secrecy and still have marketed it? POST-IT NOTES is given by Grady and Alexander as an example of a product that was serendipitously discovered, "revolutionized" its field, and yet was per se unpatentable (presumably because it was obvious). Grady & Alexander, supra note 7, at 344. It would appear that it would cost 3M significantly less to develop this product than TEFLON. Were head start, product recognition, and established marketing channel sufficient incentives?
116. Grady & Alexander, supra note 7, at 312-13.
117. As stated in Oddi, Uneasier Case, supra note 10, at 373-74 n.75: "It should also be made clear that, while it would be economically desirable for courts to uphold inventions and works of authorship that are induced by the respective systems compared to noninduced ones, factual differences and doctrinal concerns make this determination difficult in actual cases."
118. Accordingly, the higher the ratio of patent-induced to nonpatent-induced inventions, the higher the probability that a net benefit will occur to society because of the patent system.
119. See supra note 43.
120. Edmund W. Kitch, Graham v. John Deere Co., New Standards for Patents, 1966 SUP. CT. REV. 293 (1966). Kitch states: [T]wo premises ["innovation should be encouraged and patent monopolies represent a substantial cost to the consumer"] are accommodated by the basic principle on which the non-obviousness test is based: a patent should not be granted for an innovation unless the innovation would have been unlikely to have been developed absent the prospect of a patent. Id. at 301.
121. Kitch's reappraisal appears to be based in large part because of Bowman's criticism that "cost finding" should not be focused on how the invention was made, for this would penalize low cost inventions. Kitch, Nature and Function, supra note 11, at 281-82; see BOWMAN, supra note 9, at 39-42.
122. Kitch, Nature and Function, supra note 11, at 266.
123. Id. at 274.
124. Id.
125. Id. at 276-80.
126. Id. at 280-84.
127. Id.
128. In Edmund W. Kitch, Patents: Monopolies or Property Rights, in 8 RESEARCH IN LAW AND ECONOMICS 31 (John Palmer & Richard O. Zerbe, Jr. eds., 1986) [hereinafter Kitch, Patents], Kitch argues that it is the exceptional case where patents confer monopoly power, citing SCM Corp. v. Xerox Corp., 463 F. Supp. 983 (D. Conn. 1978), aff'd, 645 F.2d 1195 (2d Cir. 1981), as an example. Scherer, in a sharp response, states: "But Xerox as the classic example of monopoly-free patents? Neither theory nor evidence will support the leap."
129. Frederic M. Scherer, Comment on Edmund Kitch, in 8 RESEARCH IN LAW AND ECONOMICS 51 (John Palmer & Richard O. Zerbe, Jr. eds., 1986).
130. See Beck, supra note 12, at 199-206 (challenging Kitch's interpretation of empirical evidence relating to the commercialization of inventions, and the scope of protection actually afforded by patents); see also Merges & Nelson, supra note 13, at 872.
131. See Grady & Alexander, supra note 7, at 317. In analyzing Kitch's theory, the authors point out that: "If new fields of technology promise high patent-rent returns, a rent- dissipating race to discover the first application may occur, especially if the patent laws afford overly broad protection." Id.; see also McFetridge & Smith, supra note 12, at 203 (prospect function does not assist market participants seeking to economize common property resources.).
132. See Merges, supra note 13, at 841-42.
133. Grady & Alexander, supra note 7, at 317.
134. Merges & Nelson, supra note 13, at 908.
135. Id. at 878. ("Our argument rests on a simple premise: when it comes to invention and innovation, faster is better.").
136. Id.
137. Id. at 877, 884-908 (analyzing electrical lighting industry, automobiles and airplanes, radio, semiconductors and computers, chemical industries and science-based industries).
138. Id. at 876.
139. Id. at 872-77.
140. Id. at 916.
141. See Grady & Alexander, supra note 7, at 318 ("Secrecy measures may protect the private reward for innovation, but they can dissipate the social benefit from an innovation.").
142. This has been a pattern in Japan: Once a patent application disclosing a basic invention is published (as required by Japanese patent law), Japanese competitors immediately develop improvement inventions and file numerous patent applications, circumscribing the basic invention with every conceivable improvement. See UNITED STATES GENERAL ACCOUNTING OFFICE, U.S. COMPANIES' PATENT EXPERIENCE IN JAPAN 22-23 (1993) (surveying experience of 900 U.S. firms with the Japanese patent system). One of the major complaints of U.S. companies against Japanese patent practices is the narrow scope of protection afforded to pioneering inventions. Id. at 29-31; see also Patent Protection in Japan, EAST ASIAN EXEC. REP., Nov. 15, 1993, at 6.
143. The value of the race-to-invent theory as well as the other theories to predict case outcomes will be evaluated in Part IV.
144. Grady & Alexander, supra note 7.
145. Id. at 308.
146. Id.
147. Id. at 308, 316.
148. Id. at 306-07. "In the perverse equilibrium that would result from a system awarding full control to the inventor who is first, the costs of developing dreams that ultimately fail would equal or exceed the benefit to society of those that succeed." Id. 307-08.
149. Grady & Alexander, supra note 7, at 308 ("The granting of a patent is justified . . . [when an invention signals improvements] because it eliminates the incentive to engage in wasteful improvement efforts."). The ability to identify when an improvement is "signaled" would seem critical to the predictive capability of rent dissipation theory. See infra text accompanying notes 345-61 (critiquing the inherent ambiguity of the term).
150. Id. at 308-09, 318.
151. Id. at 321 (emphasis added).
152. Id. at 322. "[T]he desire to limit rent dissipation explains how actual patent cases are decided, both before and after an invention comes into existence." Id. at 308.
153. Id. at 321.
154. Id. at 320.
155. Donald L. Martin, Reducing Anticipated Rewards from Innovation Through Patents: Or Less is More, 78 VA. L REV. 351, 356 (1992).
156. Moreover, with respect to process inventions, as pointed out by Merges, secrecy seems to be the protection of choice, and trade secret may be more desirable than patents, because of the expense of enforcement and the difficulty of detecting infringement of process inventions. See Robert P. Merges, Rent Control in the Patent Districts: Observations on the Grady-Alexander Thesis, 78 VA. L. REV. 359, 376-77 (1992)
157. [hereinafter Merges, Rent Control].
158. Id. at 366-69.
159. Grady & Alexander, supra note 7, at 325. Occam's Razor is defined as: "[A] scientific and philosophic rule that entities should not be multiplied unnecessarily which is interpreted as requiring that the simplest of competing theories be preferred to the more complex or that explanations of unknown phenomena be sought first in terms of known quantities." WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 816 (1989).
160. The rule is named after William of Ockham (Occam) and also called "Law of Economy" or "Law of Parsimony," 8 NEW ENCYCLOPEDIA BRITANNICA 867 (15th ed. 1994). Grady and Alexander would reverse this in patent law to the effect that "entities are to be multiplied beyond necessity" presumably to the effect that patents claiming complicated (perhaps overly) inventions are more likely to be sustained than those claiming simple ("elegant") ones. Nonetheless, as this Article attempts to demonstrate, once there is "elegance" beyond a natural law, patent law seems to prefer the elegant as much as the good Franciscan did in the fourteenth century and science and philosophy do today.
161. Grady & Alexander, supra note 7, at 309 ("When an invention is so basic that it could never be improved, our theory does not predict patent protection because a patent would only increase total rent dissipation.").
162. Id. at 321.
163. Grady and Alexander essentially equate the issues of patentability and infringement as hinging on the "signal." Id. at 347-48; see infra text accompanying notes 346-62 (discussing importance of "signals" to rent dissipation theory).
164. 56 U.S. (15 How.) 62 (1854).
165. 126 U.S. 1 (1888).
166. 102 U.S. 707 (1881).
167. 17 F. Cas. 879 (S.D.N.Y. 1862) (No. 9,865).
168. Morse, 56 U.S. (15 How.) at 112. The complete claim reads: I do not propose to limit myself to the specific machinery or parts of machinery described in the foregoing specification and claims; the essence of my invention being the use of the motive power of the electric or galvanic current, which I call electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances, being a new application of that power of which I claim to be the first inventor or discoverer. Id.
169. Id. at 113.
170. Grady & Alexander, supra note 7, at 323; see also Merges & Nelson, supra note 13, at 850, who assert that the claim covers "all methods of communicating at a distance using electromagnetic waves." Whether "the motive power of the electric or galvanic current" can be read upon "electromagnic waves," e.g., generated at radio frequencies, is questionable. Morse, 56 U.S. (15 How.) at 112.
171. Morse, 56 U.S. (15 How.) at 112.
172. See id. at 72. The patent to Morse was issued in 1840 and reissued in 1848. Successful transmission of telegraphic signals between Baltimore and Washington D.C. was made in 1844 - a distance of 40 miles. See E. A. MARLAND, EARLY ELECTRICAL COMMUNICATION 136-37 (1964). Marland questions whether Morse was the inventor of the "Morse" code. Id. at 134. The author suggested that Morse obtained the idea for successive circuits from another man. Id. at 136.
173. See, e.g., MARLAND, supra note 140, at 153-81, for a history of underwater telegraph cables.
174. Grady & Alexander, supra note 7, at 323. Moreover, as postulated by Grady and Alexander, it is the patent that must "signal" improvements. Id. at 319. Assume that Morse's patent specification stated that his invention could be used for voice communications but there was no claim eight Would the telephone be "signaled" by this disclosure? Would this "signal" bar Bell from obtaining a patent on the telephone? Would the telephone infringe the Morse patent (without claim eight), presuming it was still in effect? The telephone "signal" in the Morse patent presumably would cause rent dissipation by others trying to "improve" Morse's invention unless the patent were deemed to cover the telephone. It is also interesting to note that fax machines are contemporaries of the telegraph and antedate the telephone. Patents date back to 1843. There was a dedicated line between Paris and Lyon for fax communications from 1865-1870. See IRA FLATOW, THEY ALL LAUGHED 62 (1992); see also infra notes 345-62 and accompanying text (discussing the importance of "signals" to rent dissipation theory).
175. See supra note 136 (quoting complete claim).
176. If claim eight had not been anticipated by prior art, the court could have limited the claim to what had been disclosed in the patent under the "reverse doctrine of equivalents." See infra text accompanying notes 318-28; see also Merges & Nelson, supra note 13, at 850-51 (finding the claim invalid because of a failure to satisfy an "enabling" requirement).
177. 126 U.S. 1 (1888).
178. Grady & Alexander, supra note 7, at 324. The claim by Bell was: "[T]he method of, and apparatus for, transmitting vocal or other sounds telegraphically, as herein described, by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds, substantially as set forth." The Telephone Cases, 126 U.S. at 13-14. Unless this claim is limited to wired transmissions by the word "telegraphically," would this claim read on radio transmissions with audio modulation of the radio frequency waves being "similar in form to the vibrations of the air accompanying the said vocal or other sounds"?
179. See THOMAS PARKE HUGHES, AMERICAN GENESIS 55-56 (1989).
180. See FLATOW, supra note 142, at 76.
181. HUGHES, supra note 147, at 56.
182. Id. His financial bankers were not pleased as they wanted him to work on the telegraph. See ALVIN F. HARLOW, OLD WIRES AND NEW WAVES 353 (1936).
183. See FLATOW, supra note 142, at 82.
184. See HARLOW, supra note 150, at 357 (discussing the Patent Office procedure at the time, where Bell's application was the fifth entry for the day and Gray's caveat the thirty-ninth). No hour was indicated for the entries. Unlike the procedure of the time, a caveat was a document filed to establish the conception of an invention that had not yet been reduced to practice. Harlow comments: Had the clerk entered on his blotter the hour when each of these applications was filed, much litigation and bitter feeling might have been averted in the years that followed. As it was, it was believed by some for years afterwards that Gray was first with his application. It was charged under oath that being filed first, it lay near the bottom of the day's papers, and therefore, at the close of the day's business, was entered among the last on the records - Bell's entry being the fifth and Gray's the thirty-ninth. This theory was repudiated by the Patent Office officials, and the averment was gradually built up that Gray had arrived at the office two hours later than Bell's attorney. Thirty-four applications for patents and caveats must have made that an unusually busy two hours for the office. All charges, counter-charges and denials were made long after the event. Gray at first and for months afterward meekly accepted the theory that he had been beaten. What a crude system is ours for handling such matters! What a discredit to the boasted human ingenuity and justice! Why must invention be always a race in which the prize and the only prize is awarded to the swift, or a battle in which all the honors and emoluments are handed over to the strongest and most ruthless mauler? Haroun-al-Raschid would have thought of a better plan. Id. In a near contemporaneous account, prior to Bell's first inventorship being established in the Telephone Cases, Count Du Moncel maintains that Gray's caveat was more than a mere conception but disclosed the telephone in significantly more detail than Bell's patent application and indeed disclosed a telephone that "would work perfectly." He concludes that: "Mr. Elisha Gray would certainly have obtained the patent, if the expiration of his caveat had not been the result of an omission of form in the Patent Office . . . ." COUNT Du MONCEL, THE TELEPHONE, THE MICROPHONE AND THE PHONOGRAPH 16 (1879, reprinted 1974); cf. HERBERT N. CASSON, THE HISTORY or THE TELEPHONE 90-93 (1910) (Casson's critical account of Gray's claim of first inventorship).
185. See FLATOW, supra note 142, at 83.
186. See HARLOW, supra note 149, at 375.
187. Robert V. Bruce, Alexander Graham Bell and the Conquest of Solitude, in TECHNOLOGY IN AMERICA 105, 111 (Caroll W. Pursell, Jr. ed., 1981). Bell had offered his patent to Western Union for $100,000, which was refused. FLATOW, supra note 142, at 83.
188. Bruce, supra note 155, at 111. The Bell company also agreed to stay out of the telegraph business. See HARLOW, supra note 150, at 382-83.
189. Grady & Alexander, supra note 7, at 316.
190. Theodore Vail was brought in as manager of the Bell Company, according to Harlow, "with full knowledge of the fact that the Bell telephone must have a transmitter as good as Edison's or perish." HARLOW, supra note 150, at 379-80.
191. Id. at 377-81.
192. Id. at 385. There was disagreement over which transmitter was better, and telephones were supplied at the request of the Pennsylvania Railroad with both transmitters installed side-by-side. Id. at 386-87.
193. As pointed out by Merges, Rent Control, supra note 126, at 379-80 n.73: "In terms of the rent dissipation model, signalling appears to be measured only as of the filing date. Thus, perhaps Grady and Alexander would not permit blocking patents to issue."
194. See Bruce, supra note 155, at 111.
195. 102 U.S. 707 (1881).
196. Id. at 709 (quoting Tilghman's patent, No. 11,766, Oct. 3, 1854).
197. Id. at 726-30.
198. Id. at 711-12. Merges would categorize this as a novelty case, establishing the principle that the unrecognized disclosure of the process does not qualify it as prior art Merges, Rent Control, supra note 126, at 367.
199. Grady & Alexander, supra note 7, at 325.
200. Tilghman, 102 U.S. at 733.
201. As stated by the Court: It is probably true, as contended for by the defendants, that by the use of a small portion of lime, the process can be performed with less heat than if none is used. It may be an improvement to use the lime for that purpose; but the process remains substantially the same. The patent cannot be evaded in that way. Id.
202. Grady & Alexander, supra note 7, at 324.
203. 17 F. Cas. 879 (S.D.N.Y. 1862) (No. 9,865).
204. Grady & Alexander, supra note 7, at 326.
205. Id. at 325-26.
206. Id. at 325-26. Cf. Attorney General Cushing's opinion: I think that, in the matter of which came this patent, a signal public service was peformed, honorable to the parties and to their country. It was not the discovery of the anodyne effect of the inhalation of the ether or other anaesthetic agents. It was not the invention of the performance of surgical operations on the human body while reduced to temporary insensibility by anaesthesia. These were ideas familiar for ages to men of science, and the invention or discovery of which no more belongs to any individual as property, than electricity; the fusibility of metals; the specific medicinal effects of opium, cinchona, mercury; the capacity of sleep, which Cervantes speaks of as a valuable invention; or any other of the ascertained qualities of matter, functions of animal life, or laws of inanimate nature. Neither of those things constitutes the honorable service performed in the present instance. That service consisted in the suggestion and execution of a series of experiments, which resulted in demonstrating the safety and utility of employing, more frequently than had been done heretofore, known agents of anaesthesia, by known methods, in order to the known end of facilitating surgical operations. That was a great good, and worthy of due honor. Whether it involved anything patentable or not, from which to derive pecuniary profit, is a question of specific agents and of specific agency. If it does, that relation of the case belongs to the lower category of mechanical applications, not to the higher one of great scientific discoveries. Morton's Anaesthetic Patent, 8 Op. Att'y Gen. 269, 278-79 (1856).
207. See, e.g., BARBARA M. DUNCUM, THE DEVELOPMENT OF INHALATION ANAESTHESIA 103-04 (1947). Morton discussed the use of nitrous oxide and ether with Jackson, but withheld the fact that he had experimented with ether. Duncum comments on their relationship: Upon this last point Morton probably overestimated his powers of concealment and underestimated Jackson's perspicacity. In any case it was an irony of fate that Morton, with his fear of being forestalled and his subterfuges to prevent such a happening, should have turned to Jackson for information. For although Jackson was undoubtedly a distinguished scholar, particularly in the science of geology, he had a deplorable tendency, upon the most slender grounds, to try to father other people's inventions which gave promise of being outstandingly successful especially from a financial point of view. Within three months Jackson claimed that at this very interview he had suggested to Morton the use of ether vapour as an inhalant to obviate surgical pain. Id.
208. Id. at 89-93. Dr. Long was a physician practicing in rural Jefferson, Georgia, who reported that he used ether as an anesthetic on March 30, 1842 to remove a tumor from a boy's neck. However, Long did not publicly disclose his successful use of ether in operations until 1852, six years after Morton's well publicized use of ether in 1846. For rather poignant and expectedly partial accounts of the work of Morton and Long, see WILLIAM J. MORTON, M.D., THE INVENTION OF ANAESTHETIC INHALATION; OR, DISCOVERY OF ANAESTHESIA. (1880) (by Dr. Morton's son) and FRANCES LONG TAYLOR, CRAWFORD W. LONG AND THE DISCOVERY OF ETHER ANESTHESIA (1928) (by Dr. Long's daughter).
209. See DUNCUM, supra note 175, at 11-15. There also appears to have been significant rent dissipation in perfecting a mechanism for administration of ether. When the physicians at Massachusetts General found out that Morton was applying for a patent to protect his inhalation device, they discontinued its use and poured ether directly onto a bell-shaped sponge, which was applied both over the mouth and nose of the patient Id. at 11. Moreover, during the period 1846-1847, immediately following the public disclosure of the use of ether for anesthesia, a large number of inhalers were developed throughout the world. Id. at 130-63.
210. The same criticism can be leveled at other cases relied upon by Grady and Alexander. For example, they cite an obscure case, In re Haas, 81 F.2d 408 (C.C.P.A. 1936), as another example of an "elegant" invention, where the rent dissipation theory explains the result better than the docirine actually applied by the court. See Grady & Alexander, supra note 7, at 327. Haas claimed: "A method of slicing and wrapping bread which consists in [sic] moving the bread through a zone of sterilized air, slicing the bread in said air, and finally wrapping said bread in said sterilized air." Haas, 81 F.2d at 409. The court held that this did not amount to "invention" in that the inventor had merely discovered the scientific fact that the blades were the contaminants in slicing bread, and it was obvious to sterilize the blades in view of prior art teaching similar sterilizations. Id. at 410. Grady and Alexander disagree with the court's conclusion that the invention was obvious. See Grady & Alexander, supra note 7, at 327. Nonetheless, it is another matter to categorize the invention as "elegant" and therefore unimprovable and hence unprotectable. The simple solution would be to conclude that the case was wrongly decided on the "invention" issue. In hindsight, the inventor would have been well advised to keep the process secret rather than to have applied for a patent. Wyeth v. Stone, 30 F. Gas. 723 (C.C.D. Mass. 1840) (No. 18,107), and Cochrane v. Deener, 94 U.S. 780 (1877), are cited for examples of process cases that are better explained by rent dissipation theory than by the mere function-of-the-machine doctrine. See Grady & Alexander, supra note 7, at 328. As this doctrine is no longer applied (see In re Tarczy-Hornoch, 397 F.2d 856 (C.C.P.A. 1968)), this itself would eliminate any perceived inconsistency with the result in Wyeth, where the claims were held invalid, compared to Cochrane, where the claims were sustained. The reward theory nicely explains both cases. Wyeth had not invented all methods of cutting ice into a uniform shape and therefore deserved no reward for uninvented ones, while Cochrane did deserve a reward for his contribution to the art of a specific method of separating flour from meal.
211. See, e.g., Tolfree v. Wetzler, 25 F.2d 553 (3d Cir.), cert. denied, 278 U.S. 628 (1928); Ex parte Muller, 81 U.S.P.Q. (BNA) 261 (Pat. Off. Bd. App. 1947); see also 1 DONALD L. CHISUM, PATENTS § 1.03[8][c] (1995) (discussing cases involving new use inventions).
212. 448 U.S. 176 (1980); see also Hodosh v. Block Drug Co., 833 F.2d 1575 (Fed. Cir. 1987), cert. denied, 485 U.S. 1007 (1988) (involving new use for potassium nitrate).
213. See PAUL GOLDSTEIN, COPYRIGHT, PATENT, TRADEMARK AND RELATED STATE DOCTRINES 444 (3d ed. 1993): The new definition [35 U.S.C. § 101 (b)] also dispelled the lingering question left by a much earlier decision, Morton v. New York Eye Infirmary . . . which held that plaintiffs, who had discovered the anesthetic qualities of the old compound, ether, were not entitled to a patent on the process of using ether as an anesthetic in surgery. Id.
214. Dawson Chem., 448 U.S. at 182.
215. See supra note 177.
216. 409 U.S. 63 (1972).
217. Grady & Alexander, supra note 7, at 329.
218. 450 U.S. 175 (1981).
219. Grady & Alexander, supra note 7, at 324-30.
220. 1+K; and thereafter (4) Adjusting said alarm limit to said updated alarm limit value. Parker, 437 U.S. at 596-97 (Appendix). There certainly is no indication that the invention was for any general system of calculation, but was directed to a specific technology. Cf. Justice Douglas' comment in Benson, 409 U.S. at 68: "The end use [of the BC to BCD conversion] may . . . vary from the operation of a train to verification of drivers' licenses to researching the law books for precedents . . . ."
221. As one author noted: BCD is not often used in modem high-speed digital computers for two good reasons. First, as was already pointed out, the BCD code for a given decimal number requires more bits than the straight binary code and is therefore less efficient. This is important in digital computers because the number of places in memory where these bits can be stored is limited. Second, the arithmetic processes for numbers represented in BCD code are more complicated than straight binary and thus require more complex circuitry. The more complex circuitry contributes to a decrease in the speed at which arithmetic operations take place. Calculators that use BCD are therefore considerably slower in their operation than computers. RONALD J. TOCCI, DIGITAL SYSTEMS 27-28 (1985).
222. See, e.g., Donald S. Chisum, The Patentability of Algorithms, 47 U. PITT. L. REV. 959 (1986)
223. [hereinafter Chisum, Algorithms] (severely criticizing the Benson decision). Cf. Pamela Samuelson, Benson Revisitied: The Case Against Patent Protection for Algorithms and Other Computer Program-Related Inventions, 39 EMORY L.J. 1025 (1990).
224. The present author tends to agree with Chisum. See Oddi, Uneasier Case, supra note 10, at 414-16.
225. See, e.g., In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en bane) (holding that a programmed computer is a "machine" under § 101); Arrhythmia Research Technology, Inc. v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992) (holding that a method of analyzing electrocardiograph signals is a statutory subject matter); In re Iwahashi, 888 F.2d 1370 (Fed. Cir. 1989) (reciting "read only memory" as sufficient to avoid § 101 rejection as an algorithm); see also cases collected in Samuelson, supra note 190, at 1113-22; Oddi, Uneasier Case, supra note 10, at 412-16, 427-29;
226. Richard H. Stem, Tales from the Algorithm War: Benson to Iwahashi, It's Deja Vu All Over Again, 18 A.I.P.L.A. Q.J. 371, 376 ("Iwahashi, for all practical purposes, goes back to the CCPA's immediately pre-Benson standard."); cf. In re Trovato, 33 U.S.P.Q.2d (BNA) 1194 (Fed. Cir. 1994) (finding methods and approaches for solving "shortest path problem" in computer graph theory not statutory subject matter); In re Warmerdam, 33 F.3d 1354 (Fed. Cir. 1994) (method of creating data structure for controlling motion of object not statutory subject matter, but apparatus is); In re Schrader, 22 F.3d 290 (Fed. Cir. 1994) (method of doing business nonstatutory as preempting mathematical algorithm).
227. 92 U.S. 347 (1876).
228. 87 U.S. (20 Wall.) 498 (1874).
229. Grady & Alexander, supra note 7, at 330-31.
230. Id. at 331.
231. Pencils with an eraser inserted at one end of the shaft became known as "penny pencils." These could still be purchased in the early 1940s for less than a penny. It is estimated that by the first decades of the twentieth century about 90% of all pencils came with erasers attached. See HENRY PETROSKI, THE PENCIL 177-78 (1990).
232. Perhaps such development would include mechanical pencils with affixed and even replaceable erasers. Were these improvements "signaled"?
233. Grady & Alexander, supra note 7, at 332-33.
234. 283 U.S. 1 (1931).
235. 62 F.2d 238 (2d Cir. 1932).
236. Grady & Alexander, supra note 7, at 333.
237. "If it be assumed that the process claims under consideration cover an invention, we think this lacked novelty . . . . The underlying conception had been adequately revealed in Bishop's Patent of 1901." Brogdex, 283 U.S. at 13.
238. Id. at 14.
239. Grady and Alexander distinguish Steinfur on the basis that it was a "complicated process that might easily suggest improvements." Grady & Alexander, supra note 7, at 333. It might be just as easy to say that the complicated process had been improved to perfection. The Second Circuit distinguished Brogdex on the ground that the bleached furs had a new beneficial use compared to the same use for the impregnated orange. Steinfur, 62 F.2d at 240. Whether one agrees with this distinction or not, it does not appear to relate to the complexity of the dying process but to the resulting product - the dyed furs as the "manufacture."
240. 333 U.S. 127 (1948). Professor Chisum would interpret Funk as "an interpretation of the nonobviousness or 'invention' requirement, and not of the statutory classes of subject matter." CHISUM, supra note 179, § 1.02 [7], at 1-37.
241. 447 U.S. 303 (1980).
242. Grady & Alexander, supra note 7, at 334.
243. Id. at 334-35.
244. Funk, 333 U.S. at 130.
245. See WILLIAM D.P. STEWART, NITROGEN FIXATION IN PLANTS 11 (1966) ("Their beneficial effect on the soil . . . was realized by the ancient Chinese, Greeks, and Romans, so that the widespread use of legumes in crop rotation was well established long before the reason why they were beneficial was discovered.").
246. See id. at 119.
247. William E. Newton & Barbara K. Burgess, Nitrogen Fixation: Its Scope and Importance, in NITROGEN FIXATION 1, 2 (Achim Müller & William E. Newton eds., 1983).
248. R. J. Roughly, The Production of High Quality Inoculants and their
249. See Barnaby J. Feder, Toxic Waste: Bacteria to the Rescue, N.Y. TIMES, June 27, 1990, at D1, D7 ("Mr. Chakrabarty's microbe performed too poorly to have any commercial value, so the question of releasing it never arose.").
250. See Dahlem, Las Vegas Told of Toxic-Degrading Genes, 10 BIOTECHNOLOGY NEWSWATCH 4 (1990).
251. See Mimi Bluestone et al., Microbes to the Rescue, CHEM. WK., Oct. 29, 1986, at 34.
252. Diamond v. Chakrabarty, 447 U.S. 303, 305-06 (1980).
253. Grady & Alexander, supra note 7, at 336-38.
254. 253 F.2d 156 (4th Cir. 1958).
255. Id. at 157 (claim one).
256. Id. at 163.
257. Id. at 161.
258. Grady & Alexander, supra note 7, at 337.
259. 111 U.S. 293 (1884).
260. Grady & Alexander, supra note 7, at 337.
261. 448 U.S. 176 (1980).
262. Id. at 181-82. The patent on propanil was assigned to Monsanto and found invalid in Monsanto Co. v. Rohm & Haas Co., 312 F. Supp. 778 (E.D. Pa. 1970), aff'd, 456 F.2d 592 (3d Cir.), cert. denied, 407 U.S. 934 (1972). Rohm & Haas obtained the patent at issue in Dawson Chem. when it prevailed over Monsanto in an interference over who was the first inventor of the use of propanil as an herbicide. Dawson Chem., 448 U.S. at 182 n.1.
263. This was considered a desirable end by the majority in Dawson Chem. Dawson Chem., 448 U.S. at 221-22.
264. These pharmaceuticals tend not only to be unimprovable from a technological standpoint but also from the standpoint of the disincentive for improvement because of the highly expensive and lengthy approval process before the Food and Drug Administration.
265. See CHARLES C. MANN & MARK L. PLUMMER, THE ASPIRIN WARS: MONEY, MEDICINE AND 100 YEARS OF RAMPANT COMPETITION (1991) for a history of the development of the aspirin industry. They summarize the trademark status of the word "aspirin": In some nations, such as the United States, the United Kingdom, and France, aspirin is the common name for the chemical acetylsalicylic acid, and any company may use that name to describe its product. But ASPIRIN® is a registered trademark of Bayer AG, Germany, in approximately seventy countries worldwide. And in Canada, it is a registered trademark used exclusively to identify analgesics manufactured and distributed by Sterling-Winthrop, Inc. Id. at 4. In Bayer Co. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921) (L. Hand, J.), the trademark "Aspirin" was held to be generic for the general public but still had trademark significance for manufacturing chemists, physicians and retail druggists.
266. MANN & PLUMMER, supra note 230, at 21.
267. Id. at 22, 25.
268. Id. at 25.
269. Id.
270. Id. at 28.
271. Id. at 35. See Farbenfabriken vormals Friedrich Bayer & Co. v. Chemische Fabrik Von Heyden, 22 R.P.D. & T.M. 501 (1905) (holding that the patent on ASA was for a product rather than a process for purification and was invalid as being anticipated by the prior art; but even if a process, it was also anticipated).
272. 179 F. 701 (7th Cir. 1910), cert. denied, 220 U.S. 622 (1911).
273. MANN & PLUMMER, supra note 231, at 35-36.
274. This loophole has been closed somewhat by the enactment of 35 U.S.C.A. § 271 (g) (West Supp. 1995): Whoever without authority imports into the United States or offers to sell, sells or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent. In an action for infringement of a process patent, no remedy may be granted for infringement on account of the non-commercial use or retail sale of a product unless there is no adequate remedy under this title for infringement on account of the importation or other use or sale of that product. A product which is made by a patented process will, for purposes of this title, not be considered to be so made after - (1) it is materially changed by subsequent processes; or (2) it becomes a trivial and nonessential component of another product Id.
275. Kuehmsted, 179 F. at 702 ("The appellant sells an article having an identical formula and responding to the characteristics set forth in the claim-that being the sole proof of infringement (appellant's process not being shown) . . . .").
276. 630 F.2d 120 (3d Cir.), cert. denied, 449 U.S. 1014 (1980).
277. Id. at 138.
278. Id. at 122.
279. After reviewing various empirical studies over a thirty-year period of the value of patents to innovators, Von Hippel concludes: In sharp contrast to the situation pertaining in most other industries and the electronics field in particular, the patent grant often confers significant benefit to innovators in the pharmaceutical field. My discussions with patent attorneys working for pharmaceutical firms brought out two likely reasons for this situation. First, unusually strong patents are obtainable in the chemical field, of which pharmaceuticals is a part. Second, it is often difficult to invent around a pharmaceutical patent Pharmaceutical patents can be unusually strong because one may patent an actual molecule found to have useful medical properties and its analogs. One need not make each analog claimed but can simply refer to lists of recognized functional equivalents for each component of the molecule at issue . . . . Many pharmaceutical patents are difficult to invent around today because the mechanisms by which pharmaceuticals achieve their medical effects are often not well understood. ERIC VON HIPPEL, THE SOURCES OF INNOVATION 53 (1988).
280. In particular, see C. T. TAYLOR & Z. A. SILBESTON, THE ECONOMIC IMPACT OF THE PATENT SYSTEM (1973),
281. for findings from survey data from various industries that if the patent system were abolished, R & D expenditures would be reduced by 64% by the pharmaceutical industry and 25% by the specialty chemical industries, compared to 5% by the mechanical components industry and a negligible reduction by the electrical industries. See also Richard C. Levin et al., Appropriating the Returns from Industrial Research and Development, 1987 BROOKINGS PAPERS ECON. ACTIVITY 783, 793-98 (empirical study finding greater reliance on patents in chemical-related industries); PHARMACEUTICAL PANEL, NATIONAL RESEARCH COUNCIL, THE COMPETITIVE STATUS OF THE AMERICAN PHARMACEUTICAL INDUSTRY 9-14 (1980) (study of the industry's competitive position since World War II and the issuance of the patent on streptomycin in 1948 indicating the dependence of modern pharmaceutical firms on patents to support the extensive research investment required).
282. Eli Lilly & Co., 630 F.2d at 124-25.
283. As Kitch noted: These arguments do not mean that no patents confer monopoly power upon their owners. Some of the drug patents, such as patents that achieved dramatic and unique reductions in the cost and effectiveness of medical care - probably have conferred monopolies upon their owners. But this analysis suggests that they are very exceptional cases. Kitch, Patents, supra note 99, at 39.
284. This is the logic of Judge Posner in Roberts v. Sears, Roebuck & Co., 723 F.2d 1324, 1345-48 (7th Cir. 1983) (en banc) (concurring and dissenting in part) that a quick release wrench was obvious as a matter of law because of its simplicity, low-cost to invent and ready market. See supra note 70 (discussing the Roberts case).
285. However, as elegant inventions are unimprovable by definition, it would seem the race-to-invent theory would not be greatly troubled by providing protection to such inventions. The question of whether a particular invention is to be classed as "elegant" in the sense of being unimprovable, is, of course, not one that is easily answerable.
286. See 35 U.S.C. § 101 (1988) (quoted supra note 22).
287. 383 U.S. 519 (1966).
288. Id. at 531-32. Although not the basis for the court's rejection of the patent, the court found that a homologue to the steroid had been found effective as such an agent.
289. Id. at 534-35.
290. Id. at 536.
291. Grady & Alexander, supra note 7, at 339; see also id. at 339-340. They cite Ex parte McKay, 200 U.S.P.Q. (BNA) 324 (PTO Bd. Pat App. & Int 1975), and Ex parte Druhrd, 223 U.S.P.Q. 364 (PTO Bd. Pat Aph. & Int 1983), as further examples of cases relating to the utility requirement being explained by the rent dissipation theory. The rationale is that, because the commercial value of these inventions was limited, the "signal" for improvement may be correspondingly low. McKay involved a process for extracting oxygen from extraterranial materials, and Drulard involved a portable lightning rod. With respect to McKay, Grady and Alexander state that the Board upheld a claim for the process. In fact, the Board found all appealed claims to be unpatentable under 35 U.S.C. § 103 as being obvious. It would be consistent with all the theories, except perhaps the prospect theory, to deny protection to obvious inventions.
292. 753 F.2d 1040 (Fed. Cir. 1985); see Request for Comments on Proposed Utility Examination Guidelines, 60 Fed. Reg. 97 (1994) (proposed Dec. 23, 1994), reprinted in 49 PAT. TRADEMARK & COPYRIGHT J. (BNA) 234 (1995).
293. Section 102 provides: A person shall be entitled to a patent unless - (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, or (c) he has abandoned the invention, or (d) the invention was first patented or caused to be patented, or was the subject of an inventor's certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor's certificate filed more than twelve months before the filing of the application in the United States, or (e) the invention was described in a patent granted on an application for patent by another filed in the United States before the invention thereof by the applicant for patent, or on an international application by another who has fulfilled the requirements of paragraphs (1), (2), and (4) of section 371(c) of this title before the invention thereof by the applicant for patent, or (f) he did not himself invent the subject matter sought to be patented, or (g) before the applicant's invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it. In determining priority of invention there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other. 35 U.S.C. § 102 (1988).
294. Id. § 102(a).
295. See CHISUM, supra note 179, § 3.05[2][a] (discussing and collecting cases).
296. 51 U.S. (10 How.) 477 (1850).
297. Grady & Alexander, supra note 7, at 341.
298. Conner made the safe for his own use between 1829 and 1832. Gayler, 51 U.S. at 495. The Fitzgerald patent in issue was not granted until June 1, 1843, based on an application filed April 11, 1839. Thus, during the entire period of secret knowledge or use, rent dissipation appears to be encouraged rather than discouraged by a system of qualified novelty.
299. 270 U.S. 390 (1926).
300. Id. at 401; see also Hazeltine Research, Inc. v. Brenner, 382 U.S. 252 (1965) (extending reasoning of Milburn to rejections based on § 103 with regard to co-pending applications).
301. In the present codification, see 35 U.S.C. § 122 (1988) (confidential status of applications).
302. 35 U.S.C. § 102(b) (1988) (quoted supra note 256). As explained by the court in TP Laboratories, Inc. v. Professional Positioners, Inc., 724 F.2d 965, 968 (Fed. Cir. 1984), cert. denied, 469 U.S. 826 (1984) (footnote omitted): More specifically, courts have discerned a number of factors which must be weighed in applying the statutory bar of § 102(b). Operating against the inventor are the policies of 1) protecting the public in its use of the invention where such use began prior to the filing of the application, 2) encouraging prompt disclosure of new and useful information, 3) discouraging attempts to extend the length of the period of protection by not allowing the inventor to reap the benefits for more than one year prior to the filing of the application. In contrast to these considerations, the public interest is also deemed to be served by allowing an inventor time to perfect his invention, by public testing, if desired, and prepare a patent application. Id.
303. The grace period itself may be seen as contrary to the rent dissipation theory because during this year rent may be dissipating by others trying to develop the same invention.
304. The rationale for the period of grace, which used to be two years, is to provide time for inventors to prepare patent applications and have an opportunity to market their inventions as soon as possible. See 2 CHISUM, supra note 179, § 6.02.
305. Grady & Alexander, supra note 7, at 342.
306. The principal is of long lineage: If an inventor should be permitted to hold back from the knowledge of the public the secrets of his invention; if he should for a long period of years retain the monopoly, and make and sell his invention publicly, and thus gather the whole profits of it, relying upon his superior skill and knowledge of the structure; and then, and then only, when the danger of competition should force him to secure the exclusive right, he should be allowed to take out a patent, and thus exclude the public from any farther use than what should be derived under it during his fourteen years; it would materially retard the progress of science and the useful arts, and give a premium to those who should be least prompt to communicate their discoveries. Pennock v. Dialogue, 27 U.S. (2 Pet.) 1, 19 (1827).
307. 153 F.2d 516 (2d Cir.), cert. denied, 328 U.S. 840 (1946) (invalidation of process patent filed more than one-year from the sale of products made by the process).
308. See generally 2 CHISUM, supra note 179, § 6.02[6] (discussing and collecting cases on the "on sale" statutory bar).
309. See generally id. § 6.02 [7] (discussing and collecting cases on the experimental use exception to § 102(b) statutory bars).
310. 35 U.S.C. § 102(g) (1988) (quoted supra note 256).
311. In a "first-to-file" system, the issue of who is entitled to the patent is resolved mechanically on the basis of who wins the race to the Patent Office, and pre-filing activity is irrelevant. Under the "first inventor" system in the United States, such pre-filing activity may be highly relevant and indeed determinative of who receives the patent In the United States: The general rule as to priority of invention is that priority goes to the inventor who first reduced an embodiment of the invention to practice. This rule is subject to two exceptions. The inventor who was the first to conceive the subject matter but the last to reduce to practice will prevail if he exercised reasonable diligence in reducing to practice from a time just prior to when the first person to reduce to practice conceived the subject matter. Further, the second to reduce to practice will prevail if the first abandoned, suppressed, or concealed the invention. 3 CHISUM, supra note 179, § 10.01, at 10-4.
312. 35 U.S.C. § 135 (1988) provides: (a) Whenever an application is made for a patent which, in the opinion of the Commissioner, would interfere with any pending application, or with any unexpired patent, an interference may be declared and the Commissioner shall give notice of such declaration to the applicants, or applicant and patentee, as the case may be. . . . (b) A claim which is the same as, or for the same or substantially the same subject matter as, a claim of an issued patent may not be made in any application unless such a claim is made prior to one year from the date on which the patent was granted. Id.
313. Rent may be dissipated by the interference parties but also by others working on the same or related inventions.
314. See 35 U.S.C. § 102(g) (1988) (quoted supra note 256). In Paulik v. Rizkalla, 760 F.2d 1270 (Fed. Cir. 1985), an applicant who actually reduced the invention to practice four years prior to filing, was permitted to rely upon its renewed activity from a date antedating the entry into the field by the opposing party, who was first to file an application on the same invention. 278 They are also sometimes called "time-bomb" or "shark" patents. An interesting historical example of this is the Selden patent covering the combination of an automobile, where the inventor, who happened to be a patent attorney, was able to keep the patent pending before the Patent Office for 16 years. This strategy failed. See Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893 (2d Cir. 1911); supra text accompanying notes 255-60. A recent example is the Hyatt patent (4,942516, issued July 17, 1990, based on an application filed Nov. 24, 1969) covering the invention of the microprocessor, which is said by the patentee, Gilbert Hyatt, to have spawned today's multibillion-dollar computer chip industry. Hyatt, who happens to be a patent agent in addition to an inventor, has successfully licensed his invention patent to various manufacturers, including North American Philips Corporation, Sony Corporation and Matsushita Electric Industrial Company, anticipating royalty revenues in the order of $100 million. See John Carey, Inching Toward A Borderless Patent, Bus. WK., Sept. 5, 1994, at 35;
315. Ex-Wife Sues for Micro Millions, DAILY MAIL, June 2, 1993, at 10.
316. See DIPLOMATIC CONFERENCE FOR THE CONCLUSION or A TREATY SUPPLEMENTING THE PARIS CONVENTION AS FAR AS PATENTS ARE CONCERNED, WORLD INTELLECTUAL PROPERTY ORGANIZATION, THE HAGUE, June 3-28, 1991; THE "BASIC PROPOSAL" FOR THE TREATY AND THE REGULATIONS, WORLD INTELLECTUAL PROPERTY ORGANIZATION, WIPO Doc. No. PLT/DC/3 (1990); NOTES ON THE BASIC PROPOSAL FOR THE TREATY AND REGULATIONS, WORLD INTELLECTUAL PROPERTY ORGANIZATION, WIPO Doc. No. PLT/DC/4 (1990); HISTORY OF THE PREPARATIONS OF THE PATENT LAW TRFATY, WORLD INTELLECTUAL PROPERTY ORGANIZATION, WIPO Doc. No. PLT/DC/5 (1990). The treaty would require member-states to have a "first-to-file" system (Art. 9) and to publish applications (Art 15); however, it would also require the provision of a "grace period." (Art. 12). Commerce Secretary Ron Brown announced in January 1994 that a "first-to-file" system would not be adopted in the United States. See U.S. Says "Not Now" on First-to-File and Agrees with Japan on Patent Term, 47 PAT. TRADEMARK & COPYRIGHT J. (BNA) 285 (1994). The change from a 17 year term from grant to a 20 year term from filing date and the publication of applications is far from assured. See U.S.-Japan Conclude Agreement on Reexamination and Publication, 48 PAT. COPYRIGHT & TRADEMARK J. (BNA), 412-13 (1994); see also Uruguay Round Agreements Act, Pub. L. No. 103-465, sec. 531-34, 108 Stat 4809 (1994) (20 years from filing date with exceptions, one year grace period; however, no publication requirement or "first-to-file" system); infra notes 280 and 281 (difference in Senate and House bills). Whatever political compromise is ultimately reached may well support Judge Posner's conclusion that legislative rules "tend to be efficiency reducing." POSNER ECONOMIC ANALYSIS, supra note 14, at 523.
317. S. 1854, 103d Cong., 2d Sess. (1994) (Publication 18 months after filing).
318. H.R. 4505, 103d Cong., 2d Sess. (1994) (no publication required).
319. See generally NONOBVIOUSNESS - THE ULTIMATE CONDITION OF PATENTABILITY (J. Witherspoon ed., 1980) (compiling numerous articles concerning § 103). See Giles S. Rich, The Vague Concept of "Invention" as Replaced by Section 103 of the Patent Act, id. at 1:401 (discussing events leading to judicial imposition of invention requirement); Herbert H. Mintz & C. Larry O'Rourke, The Patentability Standard in Historical Perspective: "Invention" to Section 103 Nonobviousness, id. at 2:201 (tracing historical development of invention requirement).
320. See Anthony W. Deller, The Problem of Invention in the Law of Patents, 28 J. PAT. OFF. SOC'Y 797, 802 (1946) (listing 14 negative tests of patentability, including substitution of materials, reversal of parts, change of location, size, degree and form, and aggregation of parts).
321. Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248, 267 (1850).
322. Cuno Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84, 91 (1941) (stating that a new device cannot be patented, regardless of usefulness, if it does not demonstrate a flash of creative brilliance).
323. In its entirety, § 103 states: A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall not be negatived by the manner in which the invention was made. Subject matter developed by another person, which qualifies as prior art only under subsection (f) or (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the invention was made, owned by the same person or subject to an obligation of assignment to the same person. 35 U.S.C. §103 (1988).
324. Graham v. John Deere Co., 383 U.S. 1, 19 (1966); Calmar, Inc. v. Cook Chemical Co., 383 U.S. 1, 26 (1966); United States v. Adams, 383 U.S. 39 (1966). All three cases were decided the same day. Calmar and Adams appear under the caption Graham v. John Deere Co. 288 383 U.S. 1 (1966).
325. Id. at 19.
326. Id. at 14.
327. 52 U.S. (11 How.) at 267.
328. 383 U.S. at 17.
329. Id. at 25-26.
330. The '811 patent (2,493,811) was filed February 26, 1947 and issued January 10, 1980. The '798 patent (2,627,798) was filed August 27, 1951 and issued February 10, 1953.
331. Grady & Alexander, supra note 7, at 342-47.
332. Id. at 345.
333. As of 1964, Graham continued to manufacture plows according to the '811 design. See John Deere Co. v. Graham, 333 F.2d 529, 532 (8th Cir. 1964), aff'd, 383 U.S. 1 (1966).
334. 206 F.2d 772 (5th Cir. 1953), cert. denied, 347 U.S. 920 (1954).
335. Jeoffroy Mfg., Inc. v. Graham, 219 F.2d 511, 512 n.2 (5th Cir.) (the district court's opinion appears in note 2 of the case as set forth in two letters to the parties' counsel), cert. denied, 350 U.S. 826 (1955).
336. Id. at 516-20.
337. 333 F.2d 529 (8th Cir. 1964), aff'd, 383 U.S. 1 (1966).
338. Id. John Deere, like Jeoffroy, tried to avoid infringement of the '811 and '798 patents by designing around them. See Graham v. John Deere Co., 216 F. Supp. 272, 277 (W.D. Mo. 1963), rev'd, 333 F.2d 529 (8th Cir. 1964), aff'd, 383 U.S. 1 (1966). In addition to the litigation costs, considerable rent dissipation must have occurred in attempting to design around the Graham patents.
339. Grady & Alexander, supra note 7, at 344.
340. Graham, 383 U.S. at 11.
341. There is some irony here because the '798 was patent-induced in the subjective sense. Graham obviously was relying upon the patent system in creating the alternative design and filing for a defensive patent to block competitors who would attempt to design around Graham's '811 plow.
342. 383 U.S. 1, 26 (1966).
343. Id. at 32-37.
344. Id. at 35-36.
345. Id. at 31-32. This feature was disclosed in an analogous prior act but it still demonstrated that the original design could be improved. Was it too valuable compared to the signaled improvements?
346. 383 U.S. 1, 39 (1966).
347. Grady & Alexander, supra note 7, at 346. General Mills, Inc. v. Pillsbury Company, 378 F.2d 666 (8th Cir. 1967), is the final case cited by Grady and Alexander to show that the rent dissipation theory better explains nonobvious decisions than does the doctrine itself. The invention was for a one-step angel food cake mix. Rent dissipation theory would not sustain this patent because the use of optimum proportions could not be improved. Grady & Alexander, supra note 7, at 346. The court concluded that Pillsbury's "contribution lies in determining the proper amount and proportion of acid and soda to be added to a batter to create a successful cake by a one stage mix." General Mills, 378 F.2d at 670. This combination of known ingredients was held unpatentable because it was obvious. Id. at 669-71. The reward and patent-induced theory would also support this result. It would appear that since one-step mixes were so valuable the market itself would induce their creation irrespective of the patent system. The prospect theory would be to the contrary in this highly competitive market. The race-to-invent theory would predict invalidity on technical merit, even in the light of the commercial success of the one-step mix.
348. Bert Adams conducted his experiments trying to perfect a water-activated battery in the kitchen of his apartment. One night while experimenting, ashes from his cigarette fell into cuprous oxide while being melted on the kitchen stove. He continued the experiment and used the mixture in his battery. The result was his invention with a sufficient current output being generated to light a small bulb at substantially constant voltage. He concluded that it was the carbon content in the cigarette ash acting as a catalyst that resulted in the increased current. He then experimented with other forms of carbon. The travails of Adams in making his invention and trying to obtain compensation from the government are told in RICHARD L. GAUSEWITZ, PATENT PENDING: TODAY'S INVENTORS AND THEIR INVENTIONS 54-64 (1983).
349. 35 U.S.C.A. § 271(a) (West 1984 & Supp. 1995) ("Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patent invention during the term of the patent thereof, infringes the patent.").
350. 41 U.S. (16 Pet.) 336 (1842). As the court stated: And this combination, composed of all the parts mentioned in the specification, and arranged with reference to each other, and to other parts of the plough in the manner therein described, is stated to be the improvement, and is the thing patented. The use of any two of these parts only, or of two combined with a third, which is substantially different, in form in the manner of its arrangement and connection with the others; is therefore not the thing patented. It is not the same combination if it substantially differs from it in any of its parts. Id. at 341.
351. 406 U.S. 518 (1972).
352. See 35 U.S.C.A. § 271(f) (West 1984 & Supp. 1995): (1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer. (2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer. Id.
353. 745 F.2d 11 (Fed. Cir. 1984).
354. Id. at 17-19.
355. 159 U.S. 465 (1895).
356. 184 F. 893 (2d Cir. 1911).
357. 30 F. Cas. 723 (C.C.D. Mass. 1840) (No. 18,107).
358. 805 F.2d 1558 (Fed. Cir. 1986).
359. Boyden Power-Burke Co. v. Westinghouse, 170 U.S. 537, 568 (1897) ("We have repeatedly held that a charge of infringement is sometimes made out, though the letter of the claims be avoided. . . . The converse is equally true."); see 1 CHISUM, supra note 179, § 18.04[4]; see also Merges & Nelson, supra note 13, at 853-68 (economic rationale for doctrine).
360. Grady & Alexander, supra note 7, at 318-20, 328-29, 348.
361. Id. at 320 (emphasis added). It would seem that society may well owe a debt of gratitude to "clever" individuals pouring over the prior art, such as Felix Hoffman, who is said to have found aspirin more in the library, than in the laboratory. See supra text accompanying note 233. Rather cryptically Grady and Alexander state: "If races among actual inventors are bad, presumably races among lawyers -from a rent dissipation point of view - would be worse." Grady & Alexander, supra note 7, at 320. Does this mean that patent or other lawyers cannot be "actual" inventors without, at least, going into the garage and dirtying their hands? As a matter of fact, Patent Attorney Selden evidently did get his hands dirty. He made improvements in the Brayton engine, as stated by the court in Columbia Motor Car. "To make these improvements we think that something more than mere mechanical skill was required, and, in view of the superior efficiency of the engine for the purpose for which it was designed, we hold that invention was involved." Columbia Motor Car, 184 F. at 907. Unfortunately for Selden it was the Otto engine that was improved and adopted by the industry. See id. at 910-11, 916.
362. One may be reminded of the admonition of the Supreme Court in Calmar, Inc. v. Cook Chemical Co., 383 U.S. 1, 36 (1966): "It is also irrelevant that no one apparently chose to avail himself of knowledge stored in the Patent Office and readily available by the simple expedient of conducting a patent search - a prudent and nowadays common preliminary to well organized research."
363. See Grady & Alexander, supra note 7, at 320 n.58.
364. Selden practiced in Rochester, N.Y., and was the first patent attorney retained by George Eastman, prosecuting Eastman's original patent on a process for coating dry plates. See WILLIAM GREENLEAF, MONOPOLY ON WHEELS: HENRY FORD AND THE SELDEN PATENT SUIT 8 (1961).
365. Greenleaf provides a detailed history of the Selden patent controversy. Brief histories are found in JAMES J. FLINK, AMERICA ADOPTS THE AUTOMOBILE, 1895-1910, at 318-31 (1970);
366. JOHN B. RAE, AMERICAN AUTOMOBILE MANUFACTURES: THE FIRST FORTY YEARS 72-81 (1959). Prior to being granted the patent on the motor car, Selden had been granted patents on other inventions, including a device for attaching rubber tires to wheels, apparatus for manufacturing barrel hoops and a typewriter. GREENLEAF, supra, at 9.
367. A rather perverse example of coordinating power was that attempted under the Selden patent. In 1899, Selden assigned his rights in the patent to the Electric Vehicle Co. for $10,000 and 20% of royalties derived from the patent The Electric Co. was evidently hedging its bets that the electric automobile cars might lose out to gasoline powered ones. Rights to the Selden patent then were acquired by the Association of Licensed Automobile Manufacturers (ALAM), which was a trade organization formed to license the Selden patent in an attempt to regulate entry into the gasoline-powered automobile market. This attempted coordination proved largely unsuccessful. See FLINK, supra note 328, at 318-22. The ALAM had restrictive membership policies and, in a curious twist of fate, Selden himself having assigned his patent away, had to acquire a license under his own patent He did this by acquiring a licensed manufacturer. See GREENLEAF, supra note 328, at 172-75.
368. See generally 1 CHISUM, supra note 179, § 18.04.
369. Graver Tank & Mfg. v. Linde Air Prods., 339 U.S. 605 (1950) (quoting Sanitary Refrigerator Co. v. Winters, 280 U.S. 30, 42 (1929) (quoting Machine Co. v. Murphy, 97 U.S. 120, 125 (1877))).
370. 339 U.S. 605 (1950).
371. Grady & Alexander, supra note 7, at 348 (emphasis added).
372. Id.; see Graver Tank, 339 U.S. at 610-11.
373. See 4 CHISUM, supra note 179, § 18.04[I]; see also Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931 (Fed. Cir. 1987) (en bane), cert. denied, 485 U.S. 961, and cert. denied, 485 U.S. 1009 (1988) (adopting an "all elements" analysis but compare the various views of the judges on the doctrine). The Pennwalt decision has generated a plethora of recent commentary. Compare Atlas Powder Co. v. E.I. duPont de Nemours & Co., 750 F.2d 1569, 1582 (Fed. Cir. 1984) (relevance of "heart of the invention" to equivalents analysis) with Perkin-Elmer Corp. v. Westinghouse Elec. Corp., 822 F.2d 1528,1531 n.6 (Fed. Cir. 1987) (not infringement under doctrine of equivalents if achieves the result in a substantially different way).
374. 35 U.S.C. § 271(b) (1988) provides, "Whoever actively induces infringement of a patent shall be liable as an infringer."
375. Section 271 (c) states: Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer. 35 U.S.C. § 271(c) (1988).
376. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 526 (1972).
377. 448 U.S. 176 (1980).
378. Section 271 (d) now states the following: No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; (2) licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent rights against infringement or contribu. tory infringement; (4) refused to license or use any rights to the patent; or (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned. 35 U.S.C. § 271 (d) (1988). At the time of Dawson Chem., only subparagraphs (1), (2) and (3) were specifically excluded from being classified as misuse. Subparagraphs (4) and (5) were added by the Patent and Trademark Authorization Act of 1988, Pub. L. No. 100-703, 102 Stat. 4676 (codified at 35 U.S.C. § 271 (d) (1988)).
379. Dawson Chem., 448 U.S. at 183.
380. Id. at 202.
381. See supra note 227.
382. Morton v. New York Eye Infirmary, 17 F. Cas. 879 (S.D.N.Y. 1862) (No. 9,865); see supra text accompanying notes 170-78.
383. Reckendorfer v. Faber, 92 U.S. 347 (1875); Rubber Tip Pencil Co. v. Howard, 87 U.S. (20 Wall.) 498 (1874); see supra text accompanying notes 191-96.
384. Grady & Alexander, supra note 7, at 309, 319-20, 348.
385. Id. at 319 (emphasis added).
386. Id. at 308-09, 318, 320.
387. Id. at 319.
388. "The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." 35 U.S.C. § 112 ¶ 2 (1988).
389. Applicants are prohibited from introducing new matter into their applications after the filing date: (a) No amendment shall introduce new matter into the disclosure of an application after the filing date of the application (§ 1.53(b)). All amendments to the specification, including the claims, and the drawings filed after the filing date of the application must conform to at least one of them as it was at the time of the filing of the application. Matter not found in either, involving a departure from or an addition to the original disclosure, cannot be added to the application after its filing date even though supported by an oath or declaration in accordance with § 1.63 or § 1.67 filed after the filing date of the application. (b) If it is determined that an amendment filed after the filing date of the application introduces new matter, claims containing new matter will be rejected and deletion of the new matter in the specification and drawings will be required even if the amendment is accompanied by an oath or declaration in accordance with § 1.63 or § 1.67. Rules of Practice in Patent Cases, 37 C.F.R. § 1.118 (1994).
390. Grady & Alexander, supra note 7, at 320.
391. See, e.g., Burlington Indus, v. Dayco Corp., 849 F.2d 1418,1420 (Fed. Cir. 1988) ("The trial court, after the controversy had arisen, and with the '20-20 vision of hindsight', read the patent entirely differently than did those concerned with its issue."); Fields v. Schuyler, 472 F.2d 1304, 1306 (D.C. Cir. 1972) ("The judge's experience enables him to compensate for the tendency of inventions to look obvious - with the 20-20 vision of hindsight"), cert. denied, 411 U.S. 987 (1973); Collins v. Kraft, 144 F. Supp. 162, 167 (D. Md. 1956) ("with the 20/20 vision of hindsight it may now appear simple . . . .").
392. Grady & Alexander, supra note 7, at 319.
393. 159 U.S. 465 (1895).
394. 184 F. 893 (2d Cir. 1911).
395. Grady & Alexander, supra note 7, at 319-20.
396. In November 1879, Edison filed his patent application on a light bulb with a carbon filament in a spiral shape. This filament proved to be too brittle for commercial production. A worldwide search was undertaken by Edison for the best filament material available in commercial quantities. Japanese bamboo was finally selected. Initially, light bulbs using Japanese bamboo filament would last for about 3 1/2 hours. By the end of 1880, they would burn for at least 240 hours. See FLATOW, supra note 142, at 21; see also id. at 26 (using "The Light Bulb Hall of Fame" to chart the municipal developments from 1802 to Edison's bulb in 1879).
397. Both the Brayton and Otto engines were prior art. The court stated in Columbia Motor Car. The phrase in the claim, "a liquid hydrocarbon engine of the compression type," is descriptive of the Brayton engine, which came into use about 1873, and of the Otto compression engine, which came into use a little later but still was in the antecedent art. The Brayton was undoubtedly the leading compression engine at the time of this application, but it was later superseded by the Otto. Columbia Motor Car, 184 F. at 898.
398. Id. at 901.
399. As the court recognized: It is apparent that [Selden] delayed just as long as possible the issue of the patent to him. During this long time the automobile art made marked advances along different lines, and when, in 1895, the patent was granted, it disclosed nothing new. Others had then made the patentee's discovery and had reduced it to practice in ignorance of what he had done. While he withheld his patent, the public learned from independent inventors all that it could teach. For the monopoly granted by his patent he had nothing to offer in return. The public gained absolutely nothing from his invention, whatever it was. From the point of view of public interest it was even better that the patent had never been granted. Id. at 894-95.
400. See, e.g., Brenner v. Manson, 383 U.S. 519, 534 (1966) ("[I]n light of the highly developed art of drafting patent claims so that they disclose as little useful information as possible . . . the argument based on the virtue of disclosure must be warily evaluated.").
401. See 35 U.S.C. § 112 (requiring that the "specification shall . . . set forth the best mode contemplated by the inventor for carrying out his invention").
402. Cf. Richard A. Posner, A Theory of Negligence, 1 J. LEGAL STUD. 29 (1972)
403. (study of over 1500 tort cases concluding the negligence standard produces an efficient allocation of resources). See generally WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF TORT LAW (1987).
404. For example, "signals," "elegant."
405. See Merges, Rent Control, supra note 126, at 367 ("Explaining cases that are no longer good law comes perilously close to prescribing a normative theory. . . ."). Some cases, of course, were never "good law."
406. See, e.g., supra text accompanying notes 282-303 (discussing the Graham '811 and '798 patents).
407. See supra note 128 and accompanying text (discussing the contention by Grady and Alexander that courts in patent cases reverse "Ocean's Razor" ("Law of Parsimony")).
408. See, e.g., Chisum, Algorithms, supra note 190, at 961 (charging the Supreme Court with an "antipatent judicial bias" with reference to the Benson case).
409. See A. Samuel Oddi, Contributory Infringement/Patent Misuse: Metaphysics and Metamorphosis, 44 U. PITT. L. REV. 73, 80-81 (1982) (tracing the demise of the "clear and certain signal" test for limiting patent protection).
410. From 1921 through 1973, courts of appeals invalidated 65% of the patents, while district courts invalidated 55%. Lawrence Baum, The Federal Courts and Patent Validity: An Analysis of the Record, 56 J. PAT. OFF. SOC'Y 758, 760-61 (1974).
411. From 1948 through 1977, limited to the issue of nonobviousness, 52% of patents were held invalid by district courts and 64% by the courts of appeals. Myron Cohen, Nonobviousness and the Circuit Courts of Appeal - Twenty-five Years in Review, in NONOBVIOUSNESS - THE ULTIMATE CONDITION OF PATENTABILITY, supra note 282, at 3:1, 3:13.
412. During the first three years of operation of the Court of Appeals for the Federal Circuit with respect to appeals from district court, the invalidation rate decreased to 46% on the obviousness issue and 50% on 35 U.S.C. § 102 issues. If 35 U.S.C. § 112 issues are included, the overall percentage of invalidity was 44%. Donald R. Dunner, The Court of Appeals for the Federal Circuit - Its First Three Years: Introduction, 13 AIPLA Q.J. 185, 186-89 (1985).
413. In a later study, the Court of Appeals for the Federal Circuit found validity in substantially all cases (only 3 out of 28 were reversed), whereas trial courts were equally likely to reverse as to affirm invalidity. See Ronald B. Coolley, What the Federal Circuit Has Done and How Often: Statistical Study of the CAFC Patent Decisions - 1982 to 1988, 71 J. PAT. OFF. SOC'Y 385, 391 (1989).
414. It is also interesting to note that the Court of Appeals for the Federal Circuit reversed a validity holding only 14 times out of 120 opportunities, thus indicating an affirmance rate of approximately 88%. See ROBERT L. HARMON, PATENTS AND THE FEDERAL CIRCUIT 639 (2d ed. 1991).
415. Cf. Chief Judge Markey's speech to the Section of Patent, Trademark and Copyright Law at the August 8, 1989 annual meeting of the American Bar Association in Honolulu, Hawaii, where the patent bar was admonished to refute the "slur" that statistics, without reference to the merit of individual cases, show the Court of Appeals for the Federal Circuit to be biased in favor of patents. The speech, titled "Courts are Clients Too" is reprinted in 8 PTC Newsletter, Summer/Fall 1989, at 3. These comments were evidently in response to published statistical analysis of Court of Appeals for the Federal Circuit validity and infringement decisions. See supra note 270. But see Rochelle C. Dreyfuss, The Federal Circuit: A Case Study in Specialized Courts, 64 N.Y.U. L. REV. 1, 26-27 (1989) (identifying some patent law decisions favoring patentees).
416. See POSNER, supra note 14, at § 19.2 (indicating that inefficient rules are likely to be litigated).