Patents as credence goods

Oxford Journal of Legal Studies

Volumn 27, Issue 4, 2007, Pages 707-740

  Thambisetty, Sivaramjani ^a  

^a LONDON SCHOOL OF ECONOMICS   (United Kingdom)

Author keywords

[No Author keywords available]

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EID: 36849064156     PISSN: 01436503     EISSN: 14643820     Source Type: Journal    
DOI: 10.1093/ojls/gqm021     Document Type: Article

References (164)

1. F. Machlup and E. Penrose, 'The Patent Controversy in the Nineteenth Century' (1950) 10 J Econ His 1.
2. K.J. Arrow, 'Economic Welfare and the Allocation of Resources for Invention' in R.R. Nelson (ed.), Rate and Direction of Inventive Activity (Princeton: Princeton University Press, 1962) 609-19.
3. Ibid at 615.
4. W.M. Landes and R.A. Posner, The Economic Structure of Intellectual Property Law (Cambridge, MA: Harvard University Press, 2003) 295-333.
5. Ibid at 324.
6. This is the term used by Douglass North in 'Economic Performance Through Time' (1994) 84(3) Am Econ Rev 359, at 365.
7. A. Arora, 'Refusal to License: A Transaction Approach' (2002) Prepared for FTC/DOJ hearings on competition and intellectual property law in the knowledge-based economy. Positive transaction costs in the patent system often lead to distortions in outcome. For example, when transactions are costly, bargaining strength can affect the efficiency of outcome.
8. D North, above n 6.
9. This refers to new fields of technology that are incompletely understood.
10. The chorus of complaints has grown, particularly in the US and is directly linked to the changing role of the patent office and the consequent expansion in number of patent applications filed and granted. In some sectors, the validity presumption of issued patents has become questionable. R.P. Merges, 'As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform' (1999) 14 Berkeley Tech L J 577.
11. Also see C. Shapiro, 'Patent System Reform: Economic Analysis and Critique' (2004) 19 Berkeley Tech L J 1017
12. and A.B Jaffe and J. Lerner Innovation and its Discontents: How Our Broken Patent System is Endangering Innovation and Progress and What to do About it (Princeton University Press, 2004).
13. This definition is adapted from the discussion in D. Bosworth, D. Filou and M. Longland, 'Measuring the "Quality" of Patents' (2003) Draft Report to the UK Patent Office at http://www.patent.gov.uk/about/ippd/ipresearch/qualityofpatents.pdf, accessed March 27, 2006.
14. C. Long, 'Patent Signals' (2002) 69 U Chi L Rev 625. The 'exclusivity axiom' values private property rights primarily through the notion of exclusivity. Via this axiom rational inventors find intellectual property protection valuable for the ability to capture rents and maximize control over the subject-matter of the rights that intellectual property provides.
15. Ibid, at 646. As signals patents are less useful for companies with no prior track record, start-ups looking for venture capital for example. (I am grateful to Prof. Muerer for this point).
16. Given the imbalances of patent litigation, it is unlikely that the threat of invalidation and consequent loss of reputation will necessarily address the information asymmetry. Long, above n 12, at 655-8. Under US law and as per Ch. 37 of the Code of Federal Regulations, individuals associated with the filing and prosecution of a patent application have a duty of candour relating to information material to patentability. Breach of this duty proven to a standard of clear and convincing evidence, can result in the entire patent being held to be unenforceable. 37 CFR s 1.56.
17. D. Bosworth et al., above n 11. The study shows empirically that, by and large, technological significance does translate into commercial importance.
18. Mark A. Lemley argues that 'ignorance' on the part of the patent examiner is 'rational' and ensures the most efficient use of resources on the thousands of patent applications that are granted each year. Based on the cost and incidence of patent prosecution, litigation, licensing and other uses of patents, he argues that strengthening the examination process is not cost-effective: M.A. Lemley, 'Rational Ignorance at the Patent Office' (2001) 95 Nw U L Rev 1495.
19. M.A. Lemley and C. Shapiro, 'Probabilistic Patents' (2005) 19(2) J Econ Pers 75. Practitioners have long used the simile of 'licence to sue' to reler to patent. Lemley and Shapiro's analysis develops the same basic idea. For an earlier model of the probability of patent invalidity see M.J. Meurer 'The Settlement of Patent Litigation' (1989) 20 RAND J of Econ 77.
20. J. Farrell and R.P. Merges, 'Incentives to Challenge and Defend Patents: Why Litigation will not Reliably Fix Patent Office Errors and Why Administrative Patent Review Might Help' (2004) 19 Berkeley Tech L J 1.
21. The uncertain nature of these rights, according to the authors, arises from two fundamental dimensions of uncertainty-uncertainty about the commercial significance of the patents and uncertainty about the scope and validity of the legal right being granted: Lemley and Shapiro, above n 17.
22. Lemley and Shapiro, above n 17, at 95.
23. The phenomenon of a rising number of patents obtained per research and development dollar, in spite of the highly diminished value of individual patents. G. Parchomovsky and R. Polk Wagner, 'Patent Portfolios' (2004) University of Pennsylvania Law School, Scholarship at Penn Law Paper 51 at http://lsr.nellco.org/upenn/wps/papers/51, accessed January 5, 2007. Empirical studies have also concluded that in dollar terms patent 'value' is quite low and varies according to industry.
24. See M. Schankerman, 'How Valuable is Patent Protection? Estimates by Technology Field' (1998) 29 RAND J Econ 93 (estimating mean patent value to be $4,313 for pharmaceutical patents among others)
25. and A. Pakes, 'Estimates of the Value of Holding European Patent Stocks,' (1986) 54 Econometrica 755 (reporting that only 7 per cent of French patents and 11 per cent of German patents were renewed until their expiration dates, presumably as most inventors preferred to abandon their patents rather than pay a modest renewal fee).
26. B. Sherman, 'Patent Law in a Time of Change: Non-obviousness and Biotechnology' (1990) 10 OJLS 278.
27. UK Patents Act 1977 s 14(5) and correspondingly EPC Art 84.
28. M.J. Adelman, R.R. Rader and J.R. Thomas, Cases and Materials on Patent Law (American Casebook Series, Thomson West, 2003).
29. See D.L. Burk and M.A. Lemley, 'Biotechnology's Uncertainty Principle' in F Scott Kieff (ed.), Perspectives on Properties of the Human Genome Project (London: Academic Press/Elsevier, 2003) at 305.
30. The author of a document such as a contract or patent specification is using language to make a communication for a practical purpose. A rule of construction that gives his language a different meaning from the way it would have been understood by the people to whom it was actually addressed is liable to defeat his intentions. This is the basis of the 'purposive' test of construction formulated in the case of Catnic Components Ltd v Hill and Smith Ltd [1982] RPC 183 (HL).
31. The test was recently reaffirmed and clarified by the House of Lords in Kirin Amgen Inc v Hoechst Marion Roussel Ltd and Transkaryotic Therapies (No 2) [2004] UKHL 46.
32. This problem is not restricted to biotechnology. Lemley and Burk note that the interpretation of the 'person having ordinary skill in the art' (PHOSITA) in US software patents is a controversial standard that has eviscerated the requirements of enablement and non-obviousness. D.L. Burk and M.A. Lemley 'Is Patent Law Technology Specific?' (2002) 17 Berkeley Tech L J 1155, at 1162.
33. Kirin Amgen Inc v Hoechst Marion Roussel Ltd and Transkaryotic Therapies (No 2) [2004] UKHL 46 at [32].
34. Ibid at [59].
35. D. Vaver, 'Invention in Patent Law: Review and a Modest Proposal' (2003) 11 Int J Law and Info Tech 286, at 288.
36. Erythropoietin is the most successful biotechnology product, accounting for $7 billion of the $20 billion market in recombinant products. See Amgen, Inc v Hoechst Marion Roussel, Inc 126F Supp 2d 69, 77 (D Mass 2001),
37. citing V. Bower, 'Amgen Comes out on Top in Blood Drug Patent Tussle' (1999) Biotechnology Newswatch, January 4. Contrary to the finding of the HL, the corresponding US litigation found that Amgen's patent, as a matter of construction, was not limited to exogenous DNA. Amgen, Inc v Hoechst Marion Roussel 314F 3d 1313, 1327 (Fed Cir 2003).
38. In the US, a patent attorney's professional ethics may put brakes on such behaviour, although there is considerable ambiguity about proscribed behaviour. See S.A. Rose and D.R. Jessup, 'Whose Rules? Resolving Ethical Conflicts During the Simultaneous Representation of Clients in Patent Prosecutions' (2002). Wake Forest Univ, Public Law Research Paper No 02-5 (http://ssrn.com/abstract=314565 accessed 5 January 2007 and D. Hricik, 'How Things Snowball: The Ethical Responsibilities and Liability Risks Arising from Representing a Single Client in Multiple Patent-Related Representations' (2005) 18 Geo J Legal Ethics 421. In the UK, the Chartered Institute of Patent Agents administers a Code of Professional Conduct: At http://www.cipa.org.uk/ pages/Conduct_descipline, accessed January 5, 2007.
39. 35 USC s 112.
40. R.P. Merges, P.S. Menell and M.A. Lemley, Intellectual Property in the New Technological Age (Aspen Publishers, 3rd edn, 2003) at 213.
41. C.S. Marchese, 'Confusion, Uncertainty and the Best Mode Requirement' (1992) 2 Fed Circ Bar J 1.
42. J.R. Allison and M.A. Lemley, 'Empirical Evidence on the Validity of Litigated Patents' (1998) 26 Am Intell Prop L Association Q J 185. This provision was under threat if US Bill HR 2795 (Patent Reform Act 2005) had been passed (now lapsed) partly on the grounds that enablement and written description requirements when properly applied will result in adequate disclosure. At http://www.govtrack.us/congress/ bill.xpd?bill=h109-2795 (accessed January 5, 2007).
43. The proposed Patent Reform Act 2005 in the US would have severely curtailed its scope from a judicial inquiry to an inquiry by the patent office that could result in administrative sanctions. 'Eliminating inequitable conduct from litigation is a major change that should not be entered into lightly because it will encourage deceit by unscrupulous patent applicants.' M.A. Lemley, 'Patent Law Reform: Injunctions and Damages' Testimony to the US Senate Committee on the Judiciary (June 14, 2005) at http://judiciary.senate.gov/ testimony.cfm?id=1535&wit_id=4352 accessed January 5, 2007.
44. A Mareva injunction, for example, can be discharged if the defendant can show that the plaintiff did not approach the court with clean hands: J.L. Wilson, 'Three if by Equity: Mareva Orders and the New British Invasion' (2005) 19 St Johns J Legal Comment 673, fn 213.
45. P. Jackson, 'The Maxims of Equity Revisited' in Stephen Goldstein (ed.), Equity and Contemporary Legal Developments (Proceedings of the First International Conference on Equity, Hebrew University, Jerusalem, 1992) 72.
46. The Patents Act 1949 s 32(1)(h) required the description to be fair and disclose the best method known to the patentee. W. Cornish and D. Llewelyn, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (London: Sweet & Maxwell, 2003) 164, at 229-230
47. Patents Act 1977 ss 14(3) and 72(1)(c).
48. Cornish and Llewellyn, above n 40, at 229-30.
49. Cornish and Llewellyn, above n 40, at 164. Also see H.-R. Jaenichen and P. Steinecke, 'Are There any Risks in Prosecuting Claims Relating to Alternative Embodiments of a Biotechnological Invention in a European Patent Application?' (2000) 19 Biotech L Report 310, 312 making the point that at the EPO, as in the UK, amendments may be refused if the patentee does not have 'clean hands'.
50. For example, under current UK law the notion of 'support' occupies a central role, interpretation of which is subtly different from the 'doctrine of fair basis' under the 1949 Patents Act. See Asahi Kasei Kogyo KK's Application [1991] RPC 485 (HL).
51. Biogen v Medeva [1997] RPC 1 (HL).
52. (T 409/91) [1994] OJ EPO 653, [3.3].
53. [1997] RPC 1, at [54].
54. R.S. Crespi, 'Gene and Compound Claims: Another View', [2000/2001] 1 BioS L Rev 3-8.
55. The term 'pioneering' here refers to time, not necessarily in quality or innovativeness.
56. See 'Discussion' following V. Henson-Appolonio, 'The Intellectual Property Concerns of CGIAR' in Research Tools, Public Private Partnerships and Gene Patenting, (2002) Report of Workshop 10 Commission on Intellectual Property Rights, 5: At http://www.iprcommission.org/papers/pdfs/workshops/workshop10.pdf, accessed January 5, 2007.
57. R. Pitkethly, 'The Valuation of Patents: A review of Patent Valuation Methods with Consideration of Option Based Methods and the Potential for Further Research', (1997) Oxford Intellectual Property Research Centre at www.oiprc.ox.ac.uk/RPWP0599.pdf, accessed January 5, 2007.
58. A due diligence investigation with respect to intellectual property is called for typically when a company is about to merge with, acquire or invest in another company, business or technology. The wide-ranging and complex nature of such investigations is discussed in a two-part article by A.C. Gogoris and P.J. Clarke in 'Patent Due Diligence in Biotechnology Transactions' (2001) 19(2) Nat Biotechnol at 175-7
59. and 'Patent Due Diligence in Biotechnology Transactions' (2001) 19(3) Nat Biotechnol at 279-81. Although written from the perspective of US-based market analysis, the key points are of universal relevance.
60. Long, above n 12, at 654.
61. B.H. Hall, A. Jaffe and M. Trajtenberg, 'Market Value and Patent Citations: A First look' (2001) University, NBER Working Paper no. 7741, National Bureau of Economic Research at http://www.card.iastate.edu/ research/stp/papers/hall-jaffe-trajtenberg.pdf, accessed January 5, 2007.
62. F.M. Scherer, 'Firm Size, Market Structure, Opportunity and the Output of Patented Inventions' (1965) 55 Am Econ Rev 1097
63. D. Harhoff, F.M. Scherer and K. Vopel, 'Exploring the Trail of Patent Value Distribution' in Ove Granstrand (ed.), Economics, Law and Intellectual Property: Seeking Strategies for Research and Teaching in a Developing Field (Boston, MA: Kluwer, 2003) at 279.
64. It is not just the current discounted worth of a firm that is relevant but also the ability of the firm continuously to keep up to date with the state of the art. Assets such as skilled employees, proprietary and non-proprietary information can reveal the firm's future and potential competitiveness.
65. J.R. Greene and S. Scotchmer, 'On the Division of Profit in Sequential Innovation' (1995) 26 RAND J Econ 20.
66. M. Carpenter et al., 'Linkage Between Basic Research Literature and Patents' (1980) 13(2) Research Management 30.
67. J. Lerner, 'The Importance of Patent Scope: An Empirical Analysis' (1994) 25 RAND J Econ 319.
68. J. Lanjouw and M. Schankerman, 'Patent Suits: Do They Distort Research Incentives?' (1999) at http://www.inno-tec.de/download/veranstaltung/ lan_bsh.pdf, accessed January 5, 2007. For a literature survey on patent valuation see K.A. Sneed and D.K.N. Johnson 'Selling Ideas: The Determinants of Patent Value in an Auction Environment' Colorado College Working Paper 2007-05.
69. B. Hall and R.H. Ziedonis, 'The Determinants of Patenting in the US Semiconductor Industry, 1980-1994' (2001) 32 RAND J Econ 101. The literature on cumulative innovation is part of broader studies on the optimal design of intellectual property rights.
70. See R.P. Merges and R.R. Nelson 'On the Complex Economics of Patent Scope' 90 Colum. L Rev 839 (1990).
71. M. Reitzig, 'What Determines Patent Value? Insights from the Semiconductor Industry' (2003) 32 Research Policy 13.
72. However, PatentValuePredictor.com, founded by Richard Neifeld, claims to do just this. At a price, the website offers to 'predict' the value of a US patent in a few minutes, based on a automated macroeconomic model that uses Gross Domestic Product (GDP): At www.PatentValuePredictor.com, accessed January 5, 2007.
73. This is based on Smith and Parr's division of all possible valuation methods into three bases. G.V. Smith and R.L. Parr, Valuation of Intellectual Property and Its Intangible Assets (New York: John Wiley and Sons, 2000).
74. Ibid at 262, 297-8 and 340-1.
75. R.A. Neifeld, 'A Macro-economic model Providing Patent Valuation and Patent Based Company Financial Indicators' (2001) 83 J Pat & Trademark Off Socy at 211, 216. 76 Ibid at 215.
76. A Bowie bond is a $55 million issue of a 10 year asset-backed bond, the specific collateral for which consists of royalties from 25 of David Bowie's albums that he recorded before 1990. http://www.pullmanco.com/dbb.htm, accessed January 5, 2007. Songwriters such as James Brown and the Isley Brothers have also issued similar bonds backed by expected revenue from future work.
77. J. Barney, 'A Study of Patent Mortality Rates: Using Statistical Survival Analysis to Rate and Value Patent Assets' (2002) 30 Am Intell Prop L Association Quarterly Journal 317 and 323. Recently, a few electronic companies launched an Intellectual Property Trading Centre, seeking to build an intellectual property trading market in Japan: At http://www.iptc.com/, accessed January 5, 2007. Sneed and Johnson cite freepatentauction. com and public auctions conducted by Ocean Tomo, a Chicago-based IP firm as the only two market-based IP sales institutions known to the authors. Above n 60, at 2.
78. Ibid, at 323. This statement is true only in the sense that the fees involved in applying for a patent are the same for all calibre of inventions, although in fact it may cost considerably more to prosecute an important invention through the patent office.
79. R. Pitkethly, above n 51.
80. R.A. Neifeld, 'Patent Valuation From a Practical View Point, and Some Interesting Patent Value Statistics from the PatentValuePredictor Model' at www.neifeld.com/valuearticle_040311.htm, accessed March 27, 2006.
81. R. Pitkethly, above n 51, at 5.
82. The problems in valuation presented here are in a non-adversarial context. There are a number of contexts during or prior to litigation that involve patent valuation, such as employee compensation under UK Patents Act 1977s 40(2), compensation for compulsory licences or licences of right and damages for infringement or compensation for Crown use of patents. In most of these cases the market is clearly identified by the presence of competitors and therefore valuation becomes a little easier. See generally L. Bently and B. Sherman, Intellectual Property (Oxford: OUP, 2004) at 572-3.
83. Patent offices are not obliged to evaluate a patent for the kind of information that capital markets would find interesting or valuable. This is one reason why only 1.5 per cent of patents are ever litigated and only 0.1 per cent are ever litigated to trial: Lemley and Shapiro, above n 17, at 75. (The low number may be true of most private law claims anyway, but because of the incremental way in which technology develops there is more opportunity for contention in patents compared with other areas of private law.)
84. R.P. Merges, above n 10, at 589. See also K. Dam, 'Some Economic Considerations in the Intellectual Property Protection of Software' (1991) 24 J Leg Stud 321, at 369-71, where he discusses the patent quality problem associated with software.
85. R.P. Merges above, n 10, at 589 (footnote omitted).
86. Ibid. Patents in different technologies will have varying references to non-patent references (NPRs). Biotechnology patents on average, for example, exhibit greater NPRs because of the science-based prior art of most innovations in this relatively new technology.
87. 'Germany Challenges Human Stem Cell Patent Awarded "By Mistake"' (2000) 404 Nature at 3.
88. Lemley, above n 16, fn 3.
89. Ibid at 2.
90. The Gowers Review of Intellectual Property, Ch. 6, recommendation 48 (November 2006). For a general discussion on the changing role of patent offices including their policy making role, see S. Thambisetty 'The Institutional Nature of the Patent System and its Impact on Bioethical Decision-Making' in C. Lenk, N. Hoppe and R. Andorno (eds), Ethics and the Law of Intellectual Property Rights: Problems in Politics, Science and Technology' (Ashgate Publishing, 2007), forthcoming.
91. Federal Trade Commission, 'To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy' (2003) at http://www.ftc.gov/os/ 2003/10/innovationrptsummary.pdf, accessed January 5, 2007.
92. USPTO, 'Performance and Accountability Report Fiscal Year 2004' at http://www.uspto.gov/web/offices/com/annual/2004/0402_performance.html, accessed January 5, 2007.
93. The survey also noted that 90 per cent of the patent examiners did not have time to keep up to date with advances in their scientific field: A. Abbott, 'Pressured Staff "lose faith" in Patent Quality' (2004 429 Nature at 423.
94. M.A. Heller and R.S. Eisenberg, 'Can Patents Deter Innovation? The Anticommons in Biomedical Research' (1998) 280 Science at 698.
95. S. Chartrand, 'Patents: Disproving Idea Ownership' New York Times (New York, October 23, 2000) at http://www.nytimes.com/2000/10/23/ technology/23PATE.html?ex=1143608400&en=904c4bc6f15154c5&ei=5070, accessed 5 January 2007. Long refers to the mechanisms such as this as second-tier informational intermediaries (STIIs)-entities that further appraise the quality of the work of first-tier informational intermediaries such as the patent office: Above n 12, at 670.
96. For a critical appraisal of this standard see S.A. Merrill et al. (ed.), A Patent System for the 21st Century (National Academies Press, 2004), at 91-95. A recent US Supreme Court decision may raise the non-obviousness threshold for gene sequence-related inventions by correcting an approach that was often perceived to be eschewing common sense appreciation by the skilled worker in favour of a rigid and formulaic application of the so called 'teaching, suggestion, and motivation' test. KSR International Co v Teleflex Inc. 127 S. Ct 1727 [2007].
97. American Inventors Protection Act 1999.
98. USPTO, 'Report to Congress on inter partes Reexamination' (2004) 2.
99. Ibid.
100. US Patent and Trademark Office, '21st Century Strategic Plan,' at http://www.uspto.gov/web/offices/com/strat21/index.htm, accessed January 5, 2007.
101. D. Alge, 'Opposition Practice at the EPO' (1999) Open Forum Papers at http://www.ficpi.org/library/montecarlo99/opposition.html, accessed January 5, 2007.
102. Howard Florey Institute's Application/Relaxin [1995] OJ EPO 388 (V 0008/ 94).
103. Transgenic animals/HARVARD [2004] T 0315/03 (TBA).
104. Transgenic animals/HARVARD [2004] T 0315/03 (TBA) [12.2.1]-[12.2.4].
105. M. Spence, Opposition in the European Patent Office: An Underestimated Weapon? (OIPRC/Olswang, 2002).
106. Patents Act 2004 s 13.
107. Guidance Note 5, 'Patent Office Opinions (Section 13, Patents Act 2004)' at http://www.patent.gov.uk/about/ippd/issues/patsact/guidance.htm, accessed March 27, 2006.
108. W. Emons, 'Credence Goods Monopolists' (2001) 19 Int J Ind Org 375.
109. In Switzerland, patients with the minimum level of schooling are twice as likely to have their womb or gallstones removed than patients with a university degree. Ordinary children are 80 per cent more likely to have their tonsils removed than children of medical doctors. Emons, above n 100, at 376.
110. Although there is considerable attention in the literature to the problem of asymmetric information between buyers and sellers, the theoretical literature on 'fraudulent-experts' is 'fairly small': W. Emons, 'Credence Goods and Fraudulent Experts' (1997) 28 RAND J Econ 107, at 109.
111. Information is a valuable resource, yet 'it occupies a slum dwelling in the town of economics'. So starts the classic paper written by Stigler in 1961 that precipitated an explosion of theoretical research on the economics of information: G. Stigler, 'The Economics of Information' (1961) 69 J Pol Econ 213.
112. P. Nelson, 'Information and Consumer Behaviour' (1970) 78 J Pol Econ 311.
113. M.R. Darby and E. Karni, 'Free Competition and the Optimal Amount of Fraud' (1973) 16 J L & Econ 67.
114. E. Auriol and S. Schilizzi, 'Quality Signaling Through Certification: Theory and Application to Agricultural Seed Markets' (2003) IDEI Working Papers 165, Institut d'Économie Industrielle (IDEI), Toulouse at http://idei.fr/doc/wp/2OO3/certif5.pdf, accessed January 5, 2007.
115. T. Leibi, 'Monitoring Eco-Labels: You can Have Too Much of a Good Thing' (2002) Discussion Paper, Department of Economics, University of Bern at n http://ssrn.com/abstract=318540, accessed January 5, 2007.
116. See also C. Roheim, 'Early Indications of Market Impacts from the Marine Stewardship Council's Ecolabelling of Food' (2002) Marine Stewardship Council, 13at http://www.wto.org/english/forums_e/ngo-e/ccc_msc_e.doc, accessed January 5, 2007.
117. Kevin J. Lancaster, 'A New Approach to Consumer Theory' (1971) 74 78 J Pol Econ 132.
118. Insofar as the true value is discoverable.
119. In the case of specialist medical services this requires diagnosis and treatment to be carried out by different entities: Emons, above n 100.
120. This may not be literally true, as it may be possible to produce alternate technologies or inventions that work equivalently. However, legally every patent is unique and encloses novel information.
121. Lemley and Shapiro, above n 17.
122. In the UK, when a patent is revoked in litigation it has an effect ab initio, i.e. the patent is treated as if it never existed, with retrospective effect. But a curious situation is created by the fact that revocation of a patent is not the same as a holding of invalidity, although revocation will normally flow automatically upon a finding of invalidity. This could include instances where, for example, revocation took place for a reason that had nothing to do with issues raised in an earlier invalidity action. A judicial decision to revoke a patent is, unlike a decision on validity, a decision in rem, a conclusion against all the world as to status, and not a decision in personam See the strange case of Coflexip v Stolt Comex [2004] FSR 7 (Ch. (Pat Ct)) and [2004] FSR 34 (CA).
123. This is indicated by Emons's framework setting out the conditions under which market mechanisms can solve the fraudulent expert problem. Emons, above n 100, at 387.
124. C. Carlson, 'Patent Pools and the Antitrust Dilemma' (1999) 16 Yale J of Reg 359.
125. G. Parchomovsky and R. Polk Wagner, 'Patent Portfolios' (2004) University of Pennsylvania Law School, Scholarship at Penn Law Paper 51 at http://lsr.nellco.org/upenn/wps/papers/51, accessed January 5, 2007.
126. The authors refer to empirical research that 'consistently demonstrates that industry participants do not consider patents an effective appropriation mechanism; on the contrary they deem patents inferior to other methods such as lead time, learning curve advantages and even secrecy'. Ibid above n 115, at 11-12.
127. Ibid at 29.
128. Ibid at 35.
129. Among other works, the authors cite to support this is a previous paper by Wagner that shows that determination of claim construction issues is highly variable, and dependent upon the identity of the judge hearing the case: R.P. Wagner and L. Petherbridge, 'Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance' (2003) 152 Univ of Pa L Rev 1105.
130. A related problem can arise when patent holders attempt to multiply patent rights by fragmenting a single inventive concept.
131. Long, above n 12, at 670.
132. W. Emons is concerned to show the same from his analysis of credence goods: Above n 102.
133. For a full explanation of the mathematical model, see K. Kumaramangalam, 'Science and Profit: Essays on the Biotechnology Industry' (PhD thesis, London School of Economics 2006) (revised April 10, 2006).
134. The term 'burn rate' is used by venture capitalists and industry analysts to describe the high rate of R & D dollars spent per month in emerging biotechnology firms.
135. I. Cockburn and Z. Griliches, 'Industry Effects and Appropriability Measures in the Stock Markets Valuation of R & D and Patents' (1988) 78 Am Econ Rev 419.
136. This translates to gains by attracting talented scientists, venture capital and establishing partnerships with larger pharmaceutical firms: K. Kumaramangalam, 'Do Firms Produce Better Quality Research with Greater Academic Collaboration?' (Ch. 4) in above n 123, at 77.
137. However, much like patents, scientific papers are extremely heterogeneous in quality. To capture the quality of individual scientific papers, the model uses two primary measures: First, a citation-based measure and, secondly, a measure based on the prestige of the journal in which a scientific paper is published. While both these measures capture research quality, they are based on slightly differing logic. K. Kumaramangalam, 'Why do Biotechnology Firms Make Private Knowledge Public?' (Ch. 5) in above n 123, at 131.
138. K. Arrow, 'Economic Welfare and the Allocation of Resources for Invention' in R. Nelson (ed.), The Rate and Direction of Inventive Activity (Princeton: Princeton University Press, 1962) at 609.
139. For a more recent use of this classic assumption, see also P. Dasgupta and P. David, 'Towards a New Economics of Science' (1994) 23 Research Policy 487.
140. Also see R.P. Merges, 'A New Dynamism in the Public Domain' (2004) 71 U Chi L Rev 183
141. O. Bar-Gill and G. Parchomovsky, 'The Value of Giving Secrets Away' (2003) 89 Va L Rev 1857.
142. W. Cohen and D. Levinthal, 'Absorptive Capacity-A New Perspective on Learning and Innovation' (1989) 35 Administrative Science Q 128
143. I. Cockburn and S. Henderson, 'Absorptive Capacity, Co-authoring Behaviour and the Organisation of Research in Drug Discovery' (1998) J Ind Econ 157.
144. S. Stern, 'Do Scientists Pay to Be Scientists?' (1999) NBER Working Paper Series 7410 (1999). This dual public-private behaviour is well-documented, particularly in the context of biotechnology.
145. See F. Murray, 'Innovation as Co-evolution of Scientific and Technological Networks: Exploring Tissue Engineering' (2002) 31 Research Policy 1389.
146. Their study, albeit based in a Japanese context, is not unique to the Japanese biotechnology industry: L.G. Zucker and M.R. Darby, 'Capturing Technological Opportunity Via Japan's Star Scientists: Evidence From Japanese Firms' Biotech Patents and Products' NBER Working Paper Series 6360 (2000) at http://ideas.repec.org/a/kap/jtecht/ v26y2001il-2p37-58.html, accessed January 5, 2007.
147. British Technology Group, '1999 IPR Market Benchmark Study' (BTG, 1999).
148. Available at http://www.european-patent-office.org/patinfopro/index.htm, accessed January 5, 2007. The last few decades has seen a rapid growth in a variety of arrangements for the exchange of technologies and technology platforms, including R & D joint ventures and contracts, partnerships, licensing and cross-licensing agreements. A. Arora, A. Fosfuri and A. Gambardella, Markets for Technology: The Economics of Innovation and Corporate Strategy (Cambridge, MA: MIT Press, 2001).
149. R.K. Merton 'The Normative Structure of Science' in R.K. Merton Sociology of Science (Chicago University Press, 1973).
150. Also see P. Bourdieu 'The Specificity of the Scientific Field' (1975) 14 Social Science Information at 19-47.
151. For a critical evaluation of the process in current science see C.G. Jennings 'Quality and Value: The True Purpose of Peer Review' Nature's Peer Review Debate available at www.nature.com/nature/peerreview/debate/ index.html accessed July 25, 2007.
152. accessed July 25, 2007.
153. The Gower Report recommended the community patent review (Recommendation 23).
154. M. Biagioli, 'Bringing Peer Review to Patents' First Monday http://www.firstmonday.org/issues/issuel2_6/biagioli/#32a accessed July 25, 2007.
155. R.P. Merges, above n 128.
156. See D. Lichtman, S Baker and K Kraus, 'Strategic Disclosure in the Patent System' (2000) 53 Vand L Rev 2175.
157. O. Bar-Gill and G. Parchomovsky, above n 128.
158. Heller and Eisenberg, above n 86, at 700.
159. J.P. Walsh, W.M. Cohen and A. Arora, 'Working Through the Patent Problem'(2003) Science 299 (1021).
160. Subsequent surveys by the same authors did find that access to material research inputs is restricted more often causing individual research projects to fail. J.P. Walsh, C. Cho and A. Arora, 'View From the Bench: Patents and Material Transfers' (2005) Science 309 (2002).
161. There is a mini-industry of market analysts who chart indicators of success in biotechnology, including publications, scientific collaborations and movement of 'star scientists': Zucker and Darby, above n 131.
162. P.A. Hall and D. Soskice 'An Introduction to Varieties of Capitalism' in P.A. Hall and D. Soskice (eds), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (OUP, 2001) 1.
163. The following paper challenges these assumptions convincingly: D. Akkermans, C. Castaldi and B. Los, 'Do "Liberal market Economies" Really Inovate More Radically than "Coordinated Market Economies"? Hall and Soskice Reconsidered' GGDC Working Paper 2007.
164. Douglass C. North 'The New Institutional Economics and Development' at http://www.econ.iastate.edu/tesfatsi/NewInstE.North.pdf, accessed February 15, 2007.