Limiting Patentees' Market Power Without Reducing Innovation Incentives: The Perverse Benefits of Uncertainty and Non-Injunctive Remedies

Abstract

Uncertainty and delay in patent litigation may have unforeseen virtues. The combination of these oft-criticized characteristics might induce a limited amount of infringement that enhances social welfare without reducing (or without substantially reducing) the profitability of the patentee. Patent infringement is generally viewed as socially inefficient because infringement reduces the patentee's ex ante incentive to innovate. Limited amounts of infringement combined with increased patent duration, however, can substantially reduce the distortionary ex post effects of supracompetitive pricing without reducing the patentee's ex ante incentives to innovate. Indeed, this Article derives a legal regime that preserves the incentive to innovate by giving the patentee the same expected profits, but that substantially increases efficiency in comparison with an "idealized" patent regime (in which a patentee can instantaneously win an injunction to stop infringement).