Licensing Patents, but Not by Choice

Newsletter/Publication

ABA Landslide

Abstract

In a surprising range of industries, from pharmaceuticals to technology to agriculture, individuals and firms must pay for patent licenses covering technologies that someone else chose for them.

Examples of this “compelled-choice” problem include product hopping, where patients switch to minimally changed drugs; technical standards; and herbicide drift, which forces farmers to buy patented seeds.

Compelled-choice situations confound the basic economic premises of the U.S. patent system by distorting the market-based reward and misdirecting innovation incentives.

Patent law’s flexible remedies—specifically, reasonable royalty apportionment—could mitigate these economic distortions but are not always available, such as at the ITC and in pharmaceutical litigation.

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