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The Independent-Invention Defense in Intellectual Property

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  • Scotchmer, suzanne

Abstract

Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&D.

Suggested Citation

  • 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.
  • Handle: RePEc:cdl:oplwec:qt2s5174q8
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    7. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    8. La Manna, Manfredi & Macleod, Ross & de Meza, David, 1989. "The case for permissive patents," European Economic Review, Elsevier, pages 1427-1443.
    9. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, pages 691-707.
    10. Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, pages 931-941.
    11. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, pages 395-410.
    12. Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, pages 233-239.
    13. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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