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Prior User Rights

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  • Shapiro, Carl

Abstract

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.

Suggested Citation

  • Shapiro, Carl, 2005. "Prior User Rights," Competition Policy Center, Working Paper Series qt2dc6p04t, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:compol:qt2dc6p04t
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    References listed on IDEAS

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    1. Cabral, Luis, 1994. "Bias in market R&D portfolios," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 533-547, December.
    2. Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-595, September.
    3. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    4. F. M. Scherer, 2005. "Patents," Books, Edward Elgar Publishing, number 3903, March.
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    Cited by:

    1. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.

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    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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