Analyze This: A Law and Economics Agenda for the Patent System

Patent law as a field of academic study has benefited enormously from the attention of economists. Indeed, law professors are relative newcomers to the academic patent field, trickling in behind the economists in small but growing numbers as patent law evolves from an arcane, practitioner-taught specialty to a less marginal role in law school curriculums.1 Yet considering the prominence of economists in academic discourse about the patent system, they have had relatively little impact on patent law and policy. One reason for this disparity between the role of economists in the academy and in policy arenas may be the indeterminacy of economic analysis in evaluating the patent system.2 Another reason may be a failure on the part of some economists to focus their analysis on the kinds of decisions that courts and policy-makers confront in the course of administering and fine-tuning the patent system. This is a missed opportunity of more than academic significance. The pros and cons of the patent system are getting more attention right now than they have in many years. By some measures, the patent system appears to be in ascendancy, expanding into previously hostile regions of the world,3 previously patent-free fields of endeavor,4 and previously nonproprietary research settings.5 Yet the patent system is provoking controversy along the way, as skeptics question whether these patents are on balance promoting technological progress or retarding it.6 Interest in patents has become sufficiently widespread to command the attention of busy world leaders,7 as well as prominent treatment in the popular press.8 In this environment, policy-makers are particularly likely to be receptive to scholarly input aimed at ensuring that the patent system does less harm than good. Legal scholars and economists might enhance the value and impact of their work by making more effective use of each other's knowledge and capabilities. Legal scholars can offer a more nuanced understanding of the legal rules that underlie the patent system and the doctrinal levers that might be manipulated in furtherance of public policy goals. Economists bring to bear a set of analytical and methodological tools that could shed considerable light on what these doctrinal levers are doing and which of them we ought to be manipulating. Together, we have a better chance of asking the right questions and thinking about them in a useful way. Towards that end, this Essay provides an overview of issues of patent doctrine that might be illuminated by good work in law and economics. It is important not only to identify the levers in the patent system that are available for manipulation, but also to understand which policy choices are best addressed through the manipulation of each of these levers. Economic analysis that is grounded in a better understanding of patent doctrine can better inform us about the most effective use of the levers that control the operation of the patent system. I. SUBJECT MATTER BouNDARiEs A much-noted dimension of the apparent expansion of the patent system in recent years has been the range of patent-eligible subject matter. Once confined to traditional fields of applied technology such as mechanics and chemicals, the patent system has moved into agriculture,9 medical procedures,10 computer software,11 and business methods.12 The expansion has occurred largely through judicial decisions and administrative practice, with changes in statutory language typically following, rather than leading, the way.13 As commentators have questioned whether living things, computer algorithms, and business methods are appropriate subject matter for patents, the courts in these and other areas have seen no reason to limit the patent system's realm. Why does the patent system need subject matter boundaries? What light can economics shed on the risks of the expansion of patent-eligible subject matter that seems to be underway? …