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  • Carl Shapiro

Keywords: patents, innovation, oligopoly JEL codes: L13, O31. ABSTRACT: Many inventions, great and small, are discovered independently at roughly the same time by two or more individuals or organizations. Famous examples include the light bulb (Edison and Swan), the telephone (Bell and Gray), and the integrated circuit (Kilby and Noyce). Such independent invention is common for minor technological improvements. How should property rights to an invention be defined and awarded in such cases? Patent law has struggled with this question for many years. The basic rule in the U.S. is that the patent is awarded to the first firm to invent; later independent inventors come up empty-handed. However, this basic system can create some peculiar results. Suppose that Firm A achieves an invention and files for a patent. Slightly later, but before the invention is made public, Firm B independently discovers the same invention. Firm A receives the patent and can even prevent Firm B from practicing its own invention. In legal terms, a party accused of patent infringement cannot defend itself by showing that it discovered the same invention independently. Would such an independent invention defense be desirable? Alternatively, suppose that Firm A achieves an invention, but decides not to file for a patent, perhaps because Firm A does not believe this invention is sufficiently novel and non-obvious to be patentable. Instead, Firm A uses the invention internally in its own operations as a trade secret. Later, Firm B independently discovers the same invention and files for a patent. Under current U.S. patent law, Firm B is awarded the patent because Firm A kept its invention secret.

(This abstract was borrowed from another version of this item.)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282806777211865
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 2 (May)
Pages: 92-96

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:2:p:92-96
Note: DOI: 10.1257/000282806777211865
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  1. Vincenzo Denicolo & Luigi Alberto Franzoni, 2004. "Patents, Secrets, and the First-Inventor Defense," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 517-538, 09.
  2. Scotchmer, suzanne, 1998. "The Independent-Invention Defense in Intellectual Property," Berkeley Olin Program in Law & Economics, Working Paper Series qt2s5174q8, Berkeley Olin Program in Law & Economics.
  3. Lemley, Mark A. & Shapiro, Carl, 2004. "Probabilistic Patents," Competition Policy Center, Working Paper Series qt9xf1488p, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  4. Gilbert, R. & Shapiro, C., 1988. "Optimal Patent Length And Breadth," Papers 28, Princeton, Woodrow Wilson School - Discussion Paper.
  5. Cabral, Luis, 1994. "Bias in market R&D portfolios," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 533-547, December.
  6. Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-95, September.
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