* Associate Professor, Boston University School of Law.
** Henry Luce Professor of International Political Economy, ColumbiaUniversity.
We would like to acknowledge the helpful comments and suggestions receivedfrom the following people: Harold Edgar, Donald Chisum, Rebecca Eisenberg,Joe Brodley,Steve Marks, and participants in Faculty Workshops at Boston University andColumbiaUniversity law schools. They contributed helpful advice, but none of theshortcomingsthat may remain. We are grateful for support from the Julius Silver Programin Law,Science and Technology at the Columbia Law School, and from the SloanFoundation through its funding of the Consortium on Competition andCooperation.
n1 For example, some years ago there was extensive discussion of the advantages of funneling patent claims through a special patent court. These discussions resulted in the establishment in 1982 of the Court of Appeals for the Federal Circuit. See, e.g., Dreyfuss, The Federal Circuit: A Case Study in Specialized Courts, 64 N.Y.U.L. Rev. 1, 25-26 (1989); Jordan, Specialized Courts: A Choice?, 76 Nw. U.L. Rev. 745 (1981).
n2An exception to the dearth of scholarly writing on patent scope is McFetridge & Rafiquzzaman, The Scope and Duration of the Patent Right and the Nature of Research Rivalry, 8 Res. L. & Econ. 91 (1986). In addition, a number of working papers published while this article was being written suggest that the academic neglect is ending. See R. Gilbert & C. Shapiro, Optimal Patent Length and Breadth (University of California, Berkeley, Department of Economics, Working Paper No. 89-102, Jan. 1989) (on file with authors); P. Klemperer, How Broad Should the Scope of Patent Protection Be? (Feb. 1988) (Notes for private circulation, on file with authors); S. Scotchmer & J. Green, Novelty and Disclosure in Patent Law (rev. ed. Nov. 15, 1988) (unpublished manuscript, on file with authors); see also J. Shoven, Intellectual Property Rights and Economic Growth, in Intellectual Property Rights and Capital Formation in the Next Decade 46, 49-50 (1988):
As with the length issue, there are opposing factors in determining the optimal width of the protected intellectual property rights. The advantage of interpreting the properly [sic] narrowly is that it limits the monopoly power granted to the originator . . . . However, in addition to reducing the incentives faced by the originator of the real innovation, it has another potentially important adverse effect -- the coexistence of 'neighboring' technologies, which can cause significant social waste because of the lack of standardization.
There is also a wide practice-oriented literature on patent scope doctrines. See, e.g., Noonan, Understanding Patent Scope, 65 Or. L. Rev. 717 (1986).
n3See, e.g., W. Nordhaus, Invention, Growth, and Economic Welfare (1969); Scherer, Nordhaus's Theory of Optimal Patent Life: A Geometric Reinterpretation, 62 Am. Econ. Rev. 422 (1972); Tandon, Optimal Patents with Compulsory Licensing, 90 J. Pol. Econ. 470 (1982).
n4See Grabowski & Vernon, Longer Patents for Lower Imitation Barriers: The 1984 Drug Act, 76 Am. Econ. Rev. 195 (1986).
n535 U.S.C. § 154 (1988). See generally White, Why a Seventeen Year Patent, 38 J. Pat. Off. Soc'y 839 (1956) (describing historical basis for seventeen-year term and proposing shortened terms).
n6The debate is aptly summarized in Staff of the Subcomm. on Patents, Trademarks, and Copyrights of the Senate Comm. on the Judiciary, 86th Cong., 2d Sess., Compulsory Licensing of Patents -- A Legislative History (Comm. Print 1958) (written by Catherine S. Corry). A good overview is provided by F.M. Scherer, Industrial Market Structure and Economic Performance 456-57 (2d ed. 1980) ("All in all, the substantial amount of evidence now available suggests that compulsory patent licensing, judiciously confined to cases in which patent-based monopoly power has been abused . . . would have little or no adverse impact on the rate of technological progress . . . .").
n7See F.M. Scherer, supra note 6, at 456 ("[E]very attempt to alter the U.S. law in this direction has been beaten down as a result of determined opposition from industrial groups and the patent bar.") (footnote omitted). For a brief time during the heyday of antitrust enforcement, compulsory licenses were routinely ordered. See Staff of the Subcomm. on Patents, Trademarks, and Copyrights of the Senate Comm. on the Judiciary, 86th Cong., 2d Sess., Compulsory Licensing Under Antitrust Judgments 1 (Comm. Print 1960) (written by Marcus A. Hollabaugh and Robert L. Wright).
n8U.S. Patent No. 4,736,866, issued Apr. 12, 1988, at col. 9, claim 1.
n9See id. The specification of the patent states that "the invention features a transgenic non-human eukaryotic animal (preferably a rodent such as a mouse) . . ." Id. at col. 10. The last two of twelve claims also narrow the invention to cover only rodents (claim 11) and only mice (claim 12). But most of the claims, along with the specification, describe the invention as pertaining to all nonhuman mammals, and unless claim 1 were invalidated the patent would undoubtedly extend to any nonhuman mammal. Interestingly, similar broad claim language was eliminated from the European version of this patent after a decision that the inventors had taught only enough to engineer transgenic mice, not nonhuman mammals in general. See In re President and Fellows of Harvard College (European Patent Office July 14, 1989), reported in 20 Int'l Rev. Indus. Prop. & Copyright L. 889, 895-96 (1989) (decision not final).
n10Scripps Clinic & Research Found. v. Genentech, Inc., 666 F. Supp. 1379, 1390, 3 U.S.P.Q.2d (BNA) 1481, 1488 (N.D. Cal. 1987) ("Scripps is entitled to claim purified Factor VIII:C having the characteristics of human Factor VIII:C, whether derived through its disclosed process or any other process achieving the same result."), patent invalidated, Scripps Clinic & Research Found. v. Genentech, Inc., 707 F. Supp. 1547, 1552-55, 11 U.S.P.Q.2d (BNA) 1187, 1191-94 (N.D. Cal. 1989) (patentee failed to disclose best mode known to it of carrying out its invention). The first decision is premised on the rule that products such as Factor VIII:C that occur in nature are patentable if they are so transformed by the purification process that they constitute "for every practical purpose a new thing commercially and therapeutically." Parke-Davis & Co. v. H.K. Mulford & Co., 189 F. 95, 103 (C.C.S.D.N.Y. 1911) (L. Hand, J.) (patent on purified form of adrenalin), aff'd in part and rev'd in part, 196 F. 496 (2d Cir. 1912).
n11See supra note 2.
n12Kitch, The Nature and Function of the Patent System, 20 J.L. & Econ. 265 (1977).
n13See id. at 276-77. One comment criticizes this aspect of the prospect theory. McFetridge & Smith, Patents, Prospects, and Economic Surplus: A Comment, 23 J.L. & Econ. 197 (1980). The authors of the comment claim that the efficiency gains from delayed commercialization will be dissipated by competitive rivalry for the patent; even if a patent were an exclusive right to commercialize an invention, there would still be competition to get the patent which confers these rights. This would simply shift the competition back one stage, since there is no prepatent right to get a patent. See id. at 202. For Kitch's response, see Kitch, Patents, Prospects, and Economic Surplus: A Reply, 23 J.L. & Econ. 205, 206 (1980).
n14See Kitch, supra note 12, at 279.
n16See Beck, The Prospect Theory of the Patent System and Unproductive Competition, 5 Res. L. & Econ. 193 (1983) (arguing, contrary to Kitch, that patent law does not protect all or even many future developments of a technology). See generally F.M. Scherer, supra note 6, at 447 (describing under what conditions firms may find investment in innovation profitable even without patent protection).
n17See generally W. Nordhaus, supra note 3, at 3-15; McFetridge & Rafiquzzaman, supra note 2.
n18See 35 U.S.C. § 102 (1988).
n19See 35 U.S.C. § 101.
n20See 35 U.S.C. § 103. In addition, there are two types of subject matter that cannot be patented: mathematical formulas and natural laws, and products of nature. See Gottschalk v. Benson, 409 U.S. 63, 67-68, 175 U.S.P.Q. (BNA) 673, 675-76 (1972); 1 P. Rosenberg, Patent Law Fundamentals § 6.02 (1986). Thus, there is, in effect, a fourth requirement: that an invention not fall into one of these categories.
n21The first paragraph of § 112 of the patent statute reads:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains . . . to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
35 U.S.C. § 112.
n22The second paragraph of § 112 of the patent statute reads: "The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." Id. Although the statue speaks of claims as part of this specification, they are often referred to as a separate part of the application.
n23. See, e.g., Grant v. Raymond, 31 U.S. (6 Pet.) 218, 247 (1832) (An enabling disclosure "is necessary in order to give the public, after the privilege shall expire, the advantage for which the privilege is allowed, and is the foundation of the power to issue the patent.").
n24. For an example, see infra notes 82-93 and accompanying text. Note that some cases have held that no working examples are required, as long as the specification is nevertheless enabling. See, e.g., In re Strahilevitz, 668 F.2d 1229, 1232-34, 212 U.S.P.Q. (BNA) 561, 563-65 (C.C.P.A. 1982) (upholding a patent where applicant failed to provide working examples). On the Strahilevitz patent and the opportunity it offers biotechnology inventors to file patents before obtaining working examples, see P. Kelly, Prophetic Patents in Biotechnology, 8 Bio/Technology 24, 25 (1990).
n25. U.S. Patent 775, 134, issued Nov. 15, 1904. See Gillette Safety Razor Co. v. Clark Blade & Razor Co., 187 F. 149, 149 (C.C.D.N.J. 1911), aff'd, 194 F. 421 (3d Cir. 1912).
n26. 187 F. at 156.
n27. Id. at 149.
n28. 194 F. at 423 (citations omitted) (quoting Deering v. Winona Harvester Works, 155 U.S. 286, 302 (1894)).
n29. As we use the term in this article, "device" means a product, process or compound.
n30. It is important to distinguish our use of the term "principle" here from its use in other contexts. We mean "principle" in the narrow sense of an underlying characteristic that gives a family of devices an identifiable quality. We do not mean a scientific or natural principle, i.e., a broadly applicable law such as gravity or magnetism, which cannot be patented. See supra note 20.
n31. For a further discussion of the Selden patent, see infra notes 210-218 and accompanying text.
n32. George Selden received a very broad patent in 1895 on the basic elements of the early automobile - "carriage," drive mechanism (transmission) and engine - that gave him a commanding position in the burgeoning automotive field. See U.S. Patent No. 549, 160, issued Nov. 5, 1895; Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893, 894 (2d Cir. 1911).
n33. See Electric Vehicle Co. v. Winton Motor-Carriage Co., 104 F. 814, 814-16 (C.C.S.D.N.Y. 1900); Electric Vehicle Co. v. C.A. Duerr & Co., 172 F. 923 (C.C.S.D.N.Y. 1909), rev'd sub nom. Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893 (2d Cir. 1911).
n34. Columbia Motor Car Co., 184 F. at 908-09.
n35. See U.S. Patent No. 4,736,866, supra note 8.
n36. See Bozicevic, The "Reverse Doctrine of Equivalents" in the World of Reverse Transcriptase, 71 J. Pat. & Trademark Off. Soc'y 353, 358 (1989). This was the first U.S. patent on a recombinant animal and it promises greatly to assist cancer researchers in their efforts to find effective human therapies without subjecting humans to early tests.
n37. In re President and Fellows of Harvard College (European Patent Office July 14, 1989), reported in 20 Int'l Rev. Indus. Prop. & Copyright L. 889, 895-96 (1989) ("Onco-Mouse" case) (decision not final): The invention as disclosed in its broadest concept . . . relates to any oncogene and any conceivable mammalian animal. [The European Patent Code] relates to sufficiency [of disclosure] and it is important to note that this article is satisfied only if substantially any embodiment of the invention as defined in its broadest claim is capable of being realised on the basis of the disclosure.
It is thus not believable that the skilled man would be able to transfer successfully the specific teachings of the present application to all kinds of mammalian animals . . . without applying inventive skill or undue experimentation. Animals which have been used in the prior art are mainly mice and no instructions are to be found in the specification as to how success could be achieved with other mammalian animals.
n38. See, e.g., In re Hogan, 559 F.2d 595, 606, 194 U.S.P.Q. (BNA) 527, 537 (C.C.P.A. 1977); In re Goffe, 542 F.2d 564, 567, 191 U.S.P.Q. (BNA) 429, 431 (C.C.P.A. 1976).
n39. Hogan, 559 F.2d at 606, 194 U.S.P.Q. at 537.
n40. Enablement must be established only as of the date the inventor filed for her patent. Hogan, 559 F.2d at 607, 194 U.S.P.Q. at 538. An inventor can properly claim subject matter that later turns out to be beyond her actual research, so long as her research enables one skilled in the art to make and use her claimed invention as that invention was understood as of the filing date. For example, consider an inventor who claims "crystalline polypropylene," and provides an enabling disclosure to make what everyone in the art would agree was "crystalline polypropylene" as of the filing date. After the filing date, another researcher invents a radically new family of catalysts which for the first time make possible the production of polypropylene of high molecular weight and intrinsic viscosity - two properties that make the fiber commercially useful. It has been held that the inventor's original disclosure is sufficient to sustain a patent since it was enabling as of the filing date. The result is that the inventor's claims cover the later-developed, commercially useful form of the fiber. Phillips Petroleum Co. v. United States Steel Corp., 673 F. Supp. 1278, 1286, 1292, 6 U.S.P.Q.2d (BNA) 1065, 1068, 1074 (D. Del. 1987), aff'd, 865 F.2d 1247, 9 U.S.P.Q.2d (BNA) 1461 (Fed. Cir. 1989). Note that the radically new catalysts here were the famous Ziegler catalysts. See infra notes 288-293 and accompanying text.
In cases where the subsequent modifications are minor, this approach is unobjectionable. But where the subsequent modifications are very substantial, as (arguably) in the case of polypropylene, the enablement doctrine seems to be stretched beyond credibility.
It has been argued by at least one court that the proper place to take account of this concern is at the infringement stage, when the accused infringer can argue that her invention required substantial additional research over that described in the patentee's specification, and therefore is noninfringing under the reverse doctrine of equivalents. See Hogan, 559 F.2d at 607, 194 U.S.P.Q. at 538; Texas Instruments v. United States Int'l Trade Comm'n, 846 F.2d 1369, 1372, 6 U.S.P.Q.2d (BNA) 1886, 1889 (Fed. Cir. 1988). However, as described infra at note 113 and accompanying text, this solution has little appeal because the reverse doctrine of equivalents is very rarely used.
n41See In re Armbruster, 512 F.2d 676, 680, 185 U.S.P.Q. (BNA) 152, 155 (C.C.P.A. 1975); In re Geerdes, 491 F.2d 1260, 1265, 180 U.S.P.Q. (BNA) 789, 793 (C.C.P.A. 1974).
n42See Winner, Enablement in Rapidly Developing Arts -- Biotechnology, 70 J. Pat. & Trademark Off. Soc'y, 608, 619-23 (1988). The author of this article summarizes the somewhat conflicting cases on the topic, and concludes that "[t]o reject claims for lack of enablement of embodiments that were only imagined by the examiner does not seem fair." Id. at 622.
n43The Incandescent Lamp Patent, 159 U.S. 465 (1895).
n44Id. at 468.
n45Id. at 474. Conceptually, this is closely related to another enablement doctrine, which states that patent claims covering a large number of "inoperable species" -- i.e., embodiments of the invention that do not work -- are invalid unless the specification teaches, or skilled artisans can be presumed to know, how to distinguish the embodiments that work from those that do not. See, e.g., In re Cavallito, 282 F.2d 357, 361, 127 U.S.P.Q. (BNA) 202, 205 (C.C.P.A. 1960) (claims covering generic class of several hundred thousand possible compounds invalid because the applicant had identified only thirty specific operative compounds); see also 2 D. Chisum, Patents § 7.03[c] (1990) ("claim will be rejected if it is so broad as to read upon inoperative as well as operative subject matter").
n46There is some indication that contemporary cases apply a looser standard in upholding the validity of patents over undue experimentation objections. For example, in In re Wands, 858 F.2d 731, 8 U.S.P.Q. 2d 1400 (Fed. Cir. 1988), the court found enablement in a biotechnology case although any potential user of the invention would need to screen many potentially useful monoclonal antibodies for their actual utility. The court indicated in dictum that even if the applicants' disclosed screening method had yielded a success rate of only 4 working antibodies out of 143 candidates, it would not necessarily have concluded that undue experimentation was required. Id. at 740, 8 U.S.P.Q. 2d at 1406-07; see also Ex parte Jackson, 217 U.S.P.Q. (BNA) 804, 806 (Pat. Off. Bd. App. 1982) (reversing rejection of claim to three specified strains of antibiotic-producing bacterium "and mutations thereof" since "mutations can be intentionally produced [and presumably tested for efficacy] by a variety of known procedures"). A commentator recently suggested that the Board in Jackson would only require enabling screening procedures to indicate that "at least some such mutants would have the desired characteristic of producing the antibiotic." Lentz, Adequacy of Disclosures of Biotechnology Inventions, 16 Am. Intell. Prop. L.A.Q.J. 314, 324 (1989) (emphasis added).
n4756 U.S. (15 How.) 62 (1854).
n48Id. at 112.
n49Id. at 119-20:
[I]f the eighth claim of the patentee can be maintained, there was no necessity for any specification, further than to say that he had discovered that, by using the motive power of electro-magnetism, he could print intelligible characters at any distance . . . . [T]his claim can derive no aid from the specification filed. It is outside of [the specification], and the patentee claims beyond it.
n50See, e.g., Parke-Davis & Co. v. H.K. Mulford Co., 189 F. 95 (C.C.S.D.N.Y. 1911) (L. Hand, J.) (upholding patent on purified form of adrenalin), aff'd in part and rev'd in part, 196 F. 496 (2d Cir. 1912).
n51See, e.g., Genentech, Inc.'s Patent,  R.P.C. 553, 596 (Pats. Ct.), aff'd,  R.P.C. 613 (Ct. App.) (patent on tissue plasminogen activator (t-PA) protein); see also Mellor, Patents and Genetic Engineering -- Is It a New Problem?, 10 Eur. Intell. Prop. Rev. 159 (1988) (describing British t-PA litigation). Further examples include erythropoietin (EPO), see Amgen, Inc. v. Chugai Pharmaceutical Co., 706 F. Supp. 94, 95, 9 U.S.P.Q. 2d (BNA) 1833, 1833 (D. Mass. 1989), and the blood clotting protein Factor VIII, see Scripps Clinic & Research Found. v. Genentech, Inc., 666 F. Supp. 1379, 1382, 3 U.S.P.Q. 2d (BNA) 1481, 1482 (N.D. Cal. 1987), patent invalidated in Scripps Clinic & Research Found. v. Genentech, Inc., 707 F. Supp. 1547, 11 U.S.P.Q. 2d 1187 (N.D. Cal. 1989).
n52In some cases a process patent can be broader than a product patent. For example, a patentee might claim a process for making products A through E; this would be broader, in some sense, than a product patent on product A only. Even here, however, the product patent has advantages, due to the patent principle that a product patent covers a product no matter how it is made. See Amgen, 706 F. Supp. at 107, 9 U.S.P.Q. 2d at 1844. Perhaps if patent scope were more effectively circumscribed by the enablement doctrine, in many of these cases process patents would be granted rather than product patents. Consider the situation where an inventor comes up with a significantly better process for making a chemical product, but the inventor of the earlier process holds a product patent. One might think that an Edison-like argument that the disclosure of the earlier product patent was no help whatsoever towards the discovery of the new process might carry weight, but in the case of chemical patents it often has not. This doctrine is now taking root in the related field of biotechnology patents, where a product produced by Genentech using recombinant DNA technology was recently found to infringe a patent covering the product, even though the recombinant version of the product was much simpler and cheaper to prepare. See also id. at 110, 9 U.S.P.Q. 2d at 1846-47 (product patent on erythropoietin covers recombinantly-produced version of the protein).
n53448 U.S. 176, 206 U.S.P.Q. (BNA) 385 (1980).
n54Monsanto Co. v. Rohn & Haas Co., 312 F. Supp. 778, 164 U.S.P.Q. (BNA) 556 (E.D. Pa. 1970), aff'd, 456 F.2d 592, 172 U.S.P.Q. (BNA) 323 (3d Cir.), cert. denied, 407 U.S. 934, 174 U.S.P.Q. (BNA) 129 (1972).
n55Cf. 1 D. Chisum, supra note 45, § 1.03[c] (new use must be nonobvious).
n56Note that even after Dawson Chem. Co. v. Rohm & Haas, a "new use" process patent would still infringe a prior product patent if the process employs the patented product. If the holder product patent wished to practice the new use, she would also have to take out a license. See infra notes 97 -- 100 and accompanying text.
n57See Lentz, supra note 46, at 318:
Claims to biotechnology inventions seem uncommonly broad in comparison to typical chemical cases and, therefore, seem especially vulnerable to attack under 35 U.S.C. 112 . . . .
n58See, e.g., United States v. Telectronics, Inc., 857 F.2d 778, 781, 8 U.S.P.Q.2d (BNA) 1217, 1219-20 (Fed. Cir. 1988) (finding literal infringement), cert. denied, 109 S. Ct. 1954 (1989); SRI Int'l v. Matsushita Elec. Corp. of Am., 775 F.2d 1107, 1118, 227 U.S.P.Q. (BNA) 577, 583 (Fed. Cir. 1985) (en banc) (stating that courts will find literal infringement when the accused invention "reads directly, unequivocally, and word-for-word on [the claimed] structure").
n59Royal Typewriter Co. v. Remington Rand, Inc., 168 F.2d 691, 692, 77 U.S.P.Q. (BNA) 517, 518 (2d Cir.), cert. denied, 335 U.S. 825, 79 U.S.P.Q. (BNA) 454 (1948).
n60Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608, 85 U.S.P.Q. (BNA) 328, 330 (1950) (quoting Machine Co. v. Murphy, 97 U.S. 120 (1877)).
n61166 F. Supp. 551, 119 U.S.P.Q. (BNA) 72 (S.D.N.Y. 1958).
n62Id. at 552, 119 U.S.P.Q. at 74.
n63Id. at 555, 119 U.S.P.Q. at 77.
n64Id. at 554, 119 U.S.P.Q. at 75.
n65Id. at 564, 119 U.S.P.Q. at 83. On the other hand, Ford might have been able to obtain a patent on its improvement of the basic International Nickel invention. If Ford could establish that its nodular iron composition met the requirement of patentability -- i.e., utility, novelty, and nonobviousness -- it would then have the right to control this improvement. Cantrell v. Wallick, 117 U.S. 689, 694 (1886). International Nickel would have had to obtain a license from Ford to use this improvement, even though it held the basic or dominant nodular iron patent. And of course Ford could not use its improvement without a license from International Nickel. This is an example of so-called "blocking patent," a situation often resolved by a cross-licensing agreement. For a discussion of improvement patents, see infra notes 96-98 and accompanying text.
n66See Brill v. Washington Ry. & Elec. Co., 215 U.S. 527, 532-33 (1910); Kinzenbaw v. Deere & Co., 741 F.2d 383, 388-89, 222 U.S.P.Q. (BNA) 929, 932-33 (fed. Cir. 1984), cert. denied, 470 U.S. 1004 (1985).
n67Westinghouse v. Boyden Power Brake Co., 170 U.S. 537, 561-62 (1898). Another test of pioneer status is whether the patent led to a new branch of industry. See, e.g., Ludlum Steel Co. v. Terry, 37 F.2d 153, 160 (N.D.N.Y. 1928).
n684 D. Chisum, supra note 45, § 18.04. Inventions falling somewhere between the two extremes are given an intermediate range of equivalents. See Price v. Lake Sales Supply R.M., 510 F.2d 388, 394, 183 U.S.P.Q. (BNA) 519, 524 (10th Cir. 1974). In addition to the broad range of equivalents awarded a pioneer patent, the literal wording of its claims will likely be broad as well, since by definition there is little prior art. See Patent and Trademark Office, U.S. Dept. of Commerce, Manual of Patent Examining Procedure § 706.03(d) (5th ed. 1983 rev. 1989) ("The fact that a claim is broad does not necessarily justify a rejection on the ground that the claim is vague and indefinite or unpredictable. See id. at §§ 706.03(a), 706.0392); Levin, Broader than the Disclusire in Chemical Cases, 31 J. Pat. & Trademark Off. Soc'y, 5, 7 (1949).
n69The patent in the International Nickel case was in this category. International Nickel Co. v. Ford Motor Co., 166 F. Supp. 551, 564, 119 U.S.P.Q. (BNA) 72, 82-83 (S.D.N.Y. 1958).
n70Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 85 U.S.P.Q. (BNA) 328 (1950).
n71This language comes from the Graver Tank case itself, see 339 U.S. at 610, 85 U.S.P.Q. at 331, and the Federal Circuit has continued to use it in some cases. See Perkin-Elmer Corp. v. Westinghouse Elec. Corp., 882 F.2d 1528, 1532, 3 U.S.P.Q. 2d (BNA) 1321, 1324 (Fed. Cir. 1987) (equivalents cannot be used to encompass more than an "insubstantial change"); Carmen Indus. v. Wahl, 724 F.2d 932, 942, 220 U.S.P.Q. (BNA) 481, 488 (Fed. Cir. 1983) (same as to "minor modification").
n72See, e.g., Tigrett Indus. v. Standard Indus., 162 U.S.P.Q. (BNA) 32, 36 (W.D. Tenn. 1967), aff'd, 411 F.£d 1218, 162 U.S.P.Q. (BNA) 13 (6th Cir. 1969), aff'd, 397 U.S. 586 (1970) (by equally divided court) (claim for playpen calling for "a pair of spaced openings" for two converging drawstrings to adjust side webbing infringed by device with only one hole for dawstrings); Weidman Metal Masters Co. v. Glass Master Corp., 623 F.2d 1024, 1030, 207 U.S.P.Q. (BNA) 101, 106 (5th Cir. 1980) ("even the minimum equivalency due to any patent normally forbids the mere reversal of a function of two parts and the small movement of one part of avoid literal infringement by accepting a less efficient job"), cert. denied, 450 U.S. 982, 211 U.S.P.Q (BNA) 400 (1981).
n73See, e.g., Mead Digital Sys. v. A.B. Dick Co., 723 F.2d 455, 464, 221 U.S.P.Q. (BNA) 1035, 1042 (6th Cir. 1983) (finding that ink-jet printer patent, though a "quantum leap" in the art, was not infringed by device which used elements "in a substantially different way to achieve a substantially different result").
n74Compare Gould v. Rees, 82 U.S. (15 Wall.) 187, 194 (1872) (no infringement where accused infringer "substitutes another [ingredient] in the place of the one omitted, which is new or which performs a substantially different function, or [which] is old, but was not known at the date of the plaintiff's invention as a proper substitute") with Texas Instruments, Inc. v. United States Int'l Trade Comm'n, 805 F.2d 1558, 1563, 231 U.S.P.Q. (BNA) 833, 835 (Fed. Cir. 1986) ("It is not required that those skilled in the art knew, at the time the patent application was filed, of the asserted equivalent means of performing the claimed functions; that equivalence is determined as of the time infringement takes place.") and Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 941-42 n.4, 4 U.S.P.Q.2d (BNA) 1737, 1745 n.4 (Fed. Cir. 1987) (en banc) ("It is clear that an equivalent can be found in technology known at the time of the invention, as well as in subsequently developed technology.") (Bennett, J., dissenting), cert. denied, 485 U.S. 961 (1988) and 485 U.S. 1009 (1988).
n75, 339 U.S. at 609, 85 U.S.P.Q. at 331. See Great N. Corp. v. Davis Core & Pad Co., 782 F.2d 159, 165, 228 U.S.P.Q. (BNA) 356, 359 (Fed. Cir. 1986) (examining "the scope and content of the prior art [and] the ordinary level of skill in the art [to determine if] . . . the patentee's product may be treated as an equivalent of what is claimed"); Thomas & Betts Corp. v. Litton Sys., 720 F.2d 1572, 1579, 220 U.S.P.Q. (BNA) 1, 6 (Fed. Cir. 1983) (noting that "the test of equivalency extends beyond what is literally stated in a patentee's specification to be equivalent and encompasses any element which one of ordinary skill in the art would perceive as interchangeable with the claimed element"). But see Adelman & Francione, The Doctrine of Equivalents in Patent Law: Questions that Pennwalt Did Not Answer, 137 U. Pa. L. Rev. 673, 696 n.103, 697 (1989) (arguing that interchangeability "should be used to reject rather than support the application of the doctrine of equivalents" because it signifies that a patentee could have, but mistakenly or intentionally did not, include this interchangeability in her original claims).
n76See Pennwalt, 833 F.2d at 938-39, 4 U.S.P.Q.2d at 1742-43 ("[T]he facts here do not involve later-developed computer technology which should be deemed within the scope of the claims to avoid the pirating of an invention . . . . [T]he memory components of the [accused] sorter were not programmed to perform the same or an equivalent function of physically tracking the items to be sorted . . . as required by the claims.").
n77Cf. Mead Digital Sys., 723 F.2d at 464, 221 U.S.P.Q. at 1042 (finding noninfringement under doctrine of equivalents because accused ink-jet printer used a technique for electrically charging and deflecting ink that differed from the patentee's technique). Perhaps the "different way" element of the conventional equivalents test is simply another way of stating the Supreme Court's "interchangeability" test from Graver Tank. See note supra 75 and accompanying text. If so, the "new technology" equivalents cases are not necessarily irreconcilable with Graver Tank; they simply couch their inquiry in terms of "same way," rather than "interchangeability."
n78717 F.2d 1351, 219 U.S.P.Q. (BNA) 473 (Fed. Cir. 1983).
n79Id. at 1365, 219 U.S.P.Q. at 483.
n80Id. at 1365, 219 U.S.P.Q. at 483 (quoting Bendix Corp. v. United States, 600 F.2d 1364, 1382, 204 U.S.P.Q. (BNA) 617, 631 (Ct. Cl. 1979)). One commentator criticized the opinion by Judge Markey in Hughes, stating that it was "a curious inversion of the patentee's burden of proving infringement . . . [to say] that the burden was on the infringer to explain why his structure was not an equivalent of the claimed satellite system," and concluding that "the Hughes approach would create an unfortunate aura of uncertainty around the scope of claims issued by the [Patent Office]." See Noonan, supra note 2, at 733.
n81Laser Alignment, Inc. v. Woodruff 7 Sons, 491 F.2d 866, 873-74, 180 U.S.P.Q. (BNA) 609, 613 (7th Cir.), cert. denied, 419 U.S. 874, 183 U.S.P.Q. (BNA) 321 (1974). One older case with a similar holding is Edison Elec. Light Co. v. Boston Incandescent Lamp Co., 62 F. 397 (C.C.D. Mass. 1894). Here the court found that since Edison's patent was for a pioneering invention, it was entitled to a broad construction, which included finding that after-developed technology was equivalent to that specified in the claims. Id. at 398; see also 4 D. Chisum, supra note 45, § 18.04  (discussing Laser Alignment and other cases involving new or unknown equivalents). Note that in each of these cases the after-developed technology might have been eligible for improvement patent. As mentioned earlier, this does not change the infringement analysis. But it could have given the accused infringer some leverage in bargaining with the holder of the underlying patent. See infra note 99 and accompanying text.
n82See In re Hogan, 559 F.2d 595, 606-07, 194 U.S.P.Q. (BNA) 527, 538-39 (C.C.P.A. 1977) (discussing relationship between enablement and infringement). But cf. Adelman & Francione, supra note 75, at 715-29 (suggesting that the doctrine of equivalents should not be applied when a patentee could have claimed known equivalents but did not, and asserting that the doctrine should be available only when a new technology is used to supply an equivalent component of a patented device).
n83Texas Instruments, Inc. v. United States Int'l Trade Comm'n, 805 F.2d 1558, 231 U.S.P.Q. (BNA) 833 (Fed. Cir. 1986).
n84Id. at 1570, 231 U.S.P.Q. at 840:
It is not appropriate in this case, where all of the claimed functions are performed in the accused devices by subsequently developed or improved means, to view each such change as if it were the only change from the disclosed embodiments of the invention. It is the entirety of the technology embodied in the accused devices that must be compared with the patent disclosure.
This "invention as a whole" standard was repudiated by an en banc decision of the same court the next year calling for an "element-by-element" comparison. Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 936, 4 U.S.P.Q.2d (BNA) 1737, 1741 (Fed. Cir. 1987) (en banc) ("[I]f . . . even a single function required by a claim or an equivalent function is not performed by [an accused device], . . . [a] finding of no infringement must be upheld."), cert. denied, 485 U.S. 961 (1988) and 485 U.S. 1009 (1988). Judge Pauline Newman, who wrote the Texas Instruments opinion, dissented along with five of twelve judges and wrote separately: "One-to-one correspondence between every element of a claim and an accused device is the standard formula for inquiry into literal infringement. But this formula is an incorrect application of the doctrine of equivalents. . . ." In fact, she wrote, "the courts have avoided subjecting themselves to rigid rules, for the great variety of technological situations are not amenable to all-encompassing rules." Id. at 957, 963, 4 U.S.P.Q.2d at 1757, 1762 (Newman, J., Commentary). Perhaps this point sunk in; in a later opinion, the Federal Circuit seemed to soften its definition of "element" to allow more flexibility. See Corning Glass Works v. Sumitomo Elec. U.S.A., 868 F.2d 1251, 1259, 9 U.S.P.Q.2d (BNA) 1962, 1968 (Fed. Cir. 1989) ("In the All Elements rule, 'element' is used in the sense of a limitation of a claim. . . . [Defendant's] analysis is faulty in that it would require equivalency in components . . . . However, the determination of equivalency is not subject to such a rigid formula.").
n85805 F.2d at 1566, 231 U.S.P.Q. at 837. The specification referred only to bipolar transistor semiconductors, but did not explicitly limit the invention to use with them.
n86One of the original inventors, Jack Kilby, argued that MOS technology was still unreliable when the patent application was filed and Texas Instruments argued that both types of transistors perform essentially the same function. Id. at 1566-67, 231 U.S.P.Q. at 837-38. The MOS process had been around since 1962, however, when it was discovered by Fairchild Semiconductor, Inc. See J. Tilton, International Diffusion of Technology: The Case of Semiconductors 16 91971). In any event, very few firms in 1967, the year Texas Instruments filed its patent application, foresaw the rapid rise of MOS technology and its eventual application in industry sectors such as hand-held calculators. These are the very kinds of improvements that should be encouraged, not blocked by an overly broad pioneer patent. Cf. Levin, the Semiconductor Industry, in Government and Technical Progress: A Cross-Industry Analysis 9, 13, 46 (R. Nelson ed. 1982) (emphasizing advantages of MOS technology for certain applications).
n87The engineer who made the pioneering invention at issue in the case testified at the trial that "[a]s the cost of logic was reduced, it became economically desirable to reduce the interconnections required for the chip at the expense of increased logic. The scanning keyboard is one example of this practice . . . ." 805 F.2d at 1565, 231 U.S.P.Q. at 837.
n88Id. at 1567-68, 231 U.S.P.Q. at 838-39. In addition to the fact that the LCD displays do not require paper, they also use less power than the display. Id.
n89Id. at 1566, 231 U.S.P.Q. at 837.
n90Id. at 1571, 231 U.S.P.Q. at 841. Some contend that the "as a whole" test yields unpredictable results and thus creates a great deal of uncertainty. See Bretschneider, How to Craft and Interpret Means Plus Function Claims in Light of the Pennwalt and Texas Instruments Cases, 6 Am. Intell. Prop. L.A. Selected Legal Papers 68, 73 (1988) ("the degree of uncertainty created by this 'invention as a whole' test is nearly intolerable").
n91See supra note 84.
n92See Sun Studs, Inc. v. ATA Equip. Leasing, 872 F.2d 978, 989, 10 U.S.P.Q.2d (BNA) 1338, 1347 (Fed. Cir. 1989) ("An apparatus claim describing a combination of components does not require that the function of each be performed by a separate structure in the apparatus. The claimed and accused devices must be viewed and evaluated as a whole."); Corning Glass Works v. Sumitomo Elec. U.S.A., 868 F.2d 1251, 1259, 9 U.S.P.Q.2d (BNA) 1962, 1968 (Fed. Cir. 1989) ("[T]he determination of equivalency is not subject to . . . a rigid formula. An equivalent must be found for every limitation of the claim somewhere in an accused device, but not necessarily in a corresponding component, although that is generally the case."). Compare Wilson Sporting Goods Co. v. David Geoffrey & Assocs., 14 U.S.P.Q.2d 1942 (Fed. Cir. 1990) (holding accused product should not be held to infringe under doctrine of equivalence if a hypothetical patent claim broad enough to literally cover accused product could not have been obtained from Patent Office).
n93See infra text accompanying note 329.
n94See Loctite Corp. v. Ultraseal Ltd., 781 F.2d 861, 870, 228 U.S.P.Q. (BNA) 90, 96 (Fed. Cir. 1985) ("[T]he doctrine will not extend to an infringing device within the public domain, i.e., found in the prior art at the time the patent issued. . . .").
n95See Exhibit Supply Co. v. Ace Patents Corp., 315 U.S. 126, 136, 52 U.S.P.Q. (BNA) 275, 279 (1942).
Thus a court recently dismissed an infringement action where the patentee, a biotechnology company, originally claimed a recombinant process for making erythropoietin, a polypeptide that stimulates red cell production. During prosecution of the patent the examiner rejected certain claims as obvious in light of the prior art; in response, the patentee surrendered all process claims. The patentee at trial nevertheless urged the court to interpret its claims to include the rejected material to find infringement by defendant's process for producing the polypeptide. The court declined, refusing to adopt an "interpretation [that] would 'resurrect subject matter surrendered during prosecution. . . .'" Amgen, Inc. v. Chugai Pharmaceutical Co., 706 F. Supp. 94, 110, 9 U.S.P.Q.2d (BNA) 1833, 1846 (D. Mass. 1989) (quoting Thomas & Betts Corp. v. Litton Sys., 720 F.2d 1572, 1579, 220 U.S.P.Q. (BNA) 1, 6 (Fed. Cir. 1983)). The Federal Circuit has provided a useful definition of prosecution history:
The prosecution history . . . of the patent consists of entire record of proceedings in the Patent and Trademark Office. This includes all express representations made by or on behalf of the applicant to the examiner to induce a patent grant . . . . Such representations include amendments to the claims and arguments made to convince the examiner that the claimed invention meets the statutory requirements of novelty, utility, and nonobviousness.
Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 452, 227 U.S.P.Q. (BNA) 293, 296 (Fed. Cir. 1985). The question of how broadly to define prosecution history is distinct from another question that has engaged the attention of the courts: whether there can be any equivalents left for a narrower claim when the prosecution history reveals that broader claims have been rejected. See La Bounty Mfg. v. United States Int'l Trade Comm'n, 867 F.2d 1572, 1576, 9 U.S.P.Q.2d (BNA) 1995, 1999 (Fed. Cir. 1989); Comment, Patent Claims and Prosecution History Estoppel in the Federal Circuit, 53 Mo. L. Rev. 497, 509-13, 517 (1988).
n96Two aspects of this situation may seem counterintuitive: that the narrower (subservient) patent could ever be issued by the Patent Office, given the existence of the broad patent in the prior art; and that once the subservient patent is issued, the holder of the dominant patent would be prevented from practicing an invention that clearly falls within the scope of her claims. Subservient patents may be issued, however, when they disclose an improved feature which meets the statutory tests of novelty and nonobviousness. See, e.g., Atlas Powder Co. v. E.I. Du Pont de Nemours & Co., 750 F.2d 1569, 1576 -- 77, 224 U.S.P.Q. (BNA) 409, 413-14 (Fed. Cir. 1984). The fact that the subservient patentee has invented a nonobvious variant of a device covered by a broad patent does not mean that the broad patent is invalid for lack of enabling disclosure under 35 U.S.C. § 112. See, e.g., B.G. Corp. v. Walter Kidde & Co., 79 F.2d 20, 22 (2d Cir. 1935) (L. Hand, J.) ("It is true that [the inventor of the spark plug] did not foresee the particular adaptability of his plug to the airplane . . . . Nevertheless, he did not shoot in the dark; he laid down with perfect certainty what he wished to accomplish and how . . . . [H]e is not charged with a prophetic understanding of the entire field of its usefulness."); Amerace Corp. v. Ferro Corp., 532 F. Supp. 1188, 1201-02, 213 U.S.P.Q. (BNA) 1099, 1109-10 (N.D. Tex. 1982). And a subservient patent can prevent a dominant patent holder from practicing the particular improved feature claimed in the subservient patent because a patent grant is a right to exclude, not an affirmative right to practice an invention. See 35 U.S.C. § 154 (1988). Thus the dominant patentee can exclude the subservient patentee from practicing her invention at all, and the subservient patentee can exclude the dominant patentee from practicing her specific improved feature. See Atlas Powder, 750 F.2d at 1580, 224 U.S.P.Q. at 416; Ziegler v. Phillips Petroleum Co., 483 F.2d 858, 871-72, 177 U.S.P.Q. (BNA) 481, 489-90 (5th Cir.), cert. denied, 414 U.S. 1079 180 U.S.P.Q. (BNA) 1 (1973); cf. Cantrell v. Wallick, 117 U.S. 689, 694 (1886) (Where one patent is an improvement on another patent, "neither of the two patentees can lawfully use the invention of the other without the other's consent."); Cochrane v. Deener, 94 U.S. 780, 787 (1877) ("One invention may include within it many others, and each and all may be valid at the same time.").
n97One example of patents that are so characterized is an improvement patent whose claims are drafted in a special format called "Jepson claims." See, e.g., Pentec, Inc. v. Graphic Controls Corp., 776 f.2d 309, 315, 227 U.S.P.Q. (BNA) 766, 770 (Fed. Cir. 1985); see also R. Ellis, Patent Claims § 197 (1949) (discussing Jepson format as one type of preamble portion of patent claim). Improvement patents are specifically provided for in the patent code. See 35 U.S.C. § 101. A Jepson claim has the same effect as a judicial finding that a patented invention is "dominated" by another invention. Strictly speaking only a patent drafted in Jepson format is an improvement patent. But in this article we use "improvement patent" more loosely, to describe both consciously drafted improvement claims and patents later found to be dominated by an earlier patent.
n98See Ziegler, 483 F.2d at 871, 177 U.S.P.Q. at 489; Bryan v. Sid W. Richardson, Inc., 254 F.2d 191, 117 U.S.P.Q. (BNA) 157 (5th Cir.), cert. denied, 358 U.S. 815, 119 U.S.P.Q. (BNA) 501 (1958).
n99There are limits to the bargaining power an improvement patent confers, however, as described infra notes 115-119 and accompanying text.
n100 See Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660, 672-73, 7 U.S.P.Q.2d (BNA) 1097, 1106-07 (Fed. Cir.), cert. denied, 109 S. Ct. 498 (1988); cf. Oil Well Improvements Co. v. Acme Foundry & Mach. Co., 31 F.2d 898, 901 (8th Cir. 1929) (noting that lost profits would not include profits resulting from sales of infringing device to purchasers who selected infringing device because of its "supposed superiority"). Note that the subservient patentee would, however, be liable for damages as measured by the value of royalties to the patentee under a license agreement. See 5 D. Chisum, supra note 45, § 20.03, at 20-135 to 20-136 ("In a case of blocking industrial property rights, the reasonable royalty would have to reflect an appropriate apportionment of the expected economic benefits. On the other hand, the patent owner's valid claim may have stood as a sole but complete legal obstacle to the manufacture of the product by the infringer.").
n101 Borg-Warner Corp. v. Paragon Gear Works, 355 F.2d 400, 404, 148 U.S.P.Q. (BNA) 1, 5 (1st Cir. 1965), cert. dismissed, 384 U.S. 935, 149 U.S.P.Q. (BNA) 905 (1966).
n102 Westinghouse v. Boyden Power Brake Co., 170 U.S. 537, 568 (1898) (citations omitted).
n103 Westinghouse's brake required a complicated series of passageways to supply air from the two sources. Id. at 545, 562-63.
n104 Id. at 561.
n105 Id. at 568.
n106 Id. at 572. On the application of this standard to specific cases, see Pigott, Equivalents in Reverse, 48 J. Pat. Off. Soc'y 291, 295 (1966) (noting that in Westinghouse "the claims literally read upon [i.e., cover] the accused structure").
n107 See, e.g., Leesona Corp. v. United States, 530 F.2d 896, 905-06, 185 U.S.P.Q. (BNA) 156, 163 (Ct. Cl. 1976); Precision Metal Fabricators v. Jetstream Sys. Co., 693 F. Supp. 814, 819, 6 U.S.P.Q.2d (BNA) 1704, 1708 (N.D. Cal. 1988) (no infringement where defendant's "machines do not operate on the same principle as plaintiff's . . . . This appears to be a case where the defendants are not gaining the benefit of plaintiff's patents, but their equipment could fall within the literal language of the patents."); Mechanical Plastics Corp. v. Unifast Indus., 657 F. Supp. 502, 504, 4 U.S.P.Q.2d (BNA) 1734, 1736 (E.D.N.Y. 1987) ("Where a device serves the same or a similar purpose to the patented invention, but functions in a substantially different way, the fact that it falls within the literal language of the claim does not warrant a finding of infringement."), aff'd, 846 F.2d 78 (1988) (without opinion); Brenner v. Recognition Equip., 593 F. Supp. 1275, 1278, 225 U.S.P.Q. (BNA) 1068, 1070 (S.D.N.Y. 1984) (alternative holding); see also Pigott, supra note 106 (collecting many cases on two related issues: narrowing claims by reference to the specification to save the claims from invalidity, and "narrowing" claims to excuse infringement under the reverse doctrine of equivalents).
n108 775 F.2d 1107, 227 U.S.P.Q. (BNA) 577 (Fed. Cir. 1985) (en banc).
n109 Id. at 1111, 227 U.S.P.Q. at 577.
n110 SRI Int'l v. Matsushita Elec. Corp. of Am., 591 F. Supp. 464, 468, 224 U.S.P.Q. (BNA) 70, 73 (N.D. Cal. 1984), rev'd, 775 F.2d 1107, 227 U.S.P.Q. (BNA) 577 (Fed. Cir. 1985) (en banc).
n111 775 F.2d at 1123, 227 U.S.P.Q. at 587 (emphasis in original) (lead opinion, five judges joining). See id. at 1132, 227 U.S.P.Q. at 594 (Davis, J., concurring); id. at 1133, 227 U.S.P.Q. at 595 (Kashiwa, J., dissenting, five judges joining).
n112 Compare id. at 1125, 227 U.S.P.Q. at 589 (genuine issues of material fact still unresolved) (lead opinion, five judges joining); with id. at 1132, 227 U.S.P.Q. at 594 (Davis, J., concurring) (reverse equivalents is always a matter of fact, not law) and id. at 1133, 227 U.S.P.Q. at 594-95 (Kashiwa, J., dissenting, five judges joining) (no genuine factual issues left to resolve; one of two alternative legal findings is that reverse equivalents defense is valid here as a matter of law).
n113 Ethyl Molded Prods. Co. v. Betts Package, Inc., 9 U.S.P.Q. 2d (BNA) 1001, 1026 (E.D. Ky. 1988) ("The reverse doctrine of equivalents, although frequently argued by infringers, has never been applied by the Federal Circuit."); Phillips Petroleum Co. v. United States Steel Corp., 673 F. Supp. 1278, 1350, 6 U.S.P.Q. 2d (BNA) 1065, 1123 (D. Del. 1987) (pointing out that reverse equivalents is rarely successfully asserted), aff'd, 865 F.2d 1247, 9 U.S.P.Q. 2d (BNA) 1461 (Fed. Cir. 1989).
n114 See United States Steel Corp. v. Phillips Petroleum Co., 865 F.2d 1247, 1253 n.11, 9 U.S.P.Q. 2d (BNA) 1461, 1466 N.11 (Fed. Cir. 1989); Herman v. Youngstown Car Mfg. Co., 191 F. 579, 584-85 (6th Cir. 1911); Bendix Corp. v. United States, 199 U.S.P.Q. (BNA) 203, 222 (Ct. Cl. Trial Div. 1978), aff'd, 600 F.2d 1364, 204 U.S.P.Q. (BNA) 617 (Ct. Cl. 1979).
n115 The "holdup" problem was originally applied to situations where one buyer needs to acquire complementary assets from a number of sellers; some of the sellers may raise their prices to capture some of the value the buyer attributes to holding all the assets. See, e.g., Calabresi & Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089, 1106-07 (1972) (example of sale of small parcels of land to buyer who needs all parcels used as illustration of necessity for "liability rule" such as eminent domain). It has been extended to two-party contracts, see Klein, Crawford & Alchian, Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, 21 J.L. & Econ. 297 (1978); Klein, Transaction Cost Determinants of "Unfair" Contractual Arrangements, 70 Am. Econ. Rev. (Papers & Proc.) 356, 356-57 (May 1980), reprinted in Readings in the Economics of Contract Law 139, 139-40 (V. Goldberg ed. 1989). The paper by Klein, Crawford and Alchian presents the best analogy to the improver-original patentee bargaining situation. This paper describes the opportunities for exerting holdup rights where one firm, after investing in an asset with a low salvage value and a rent stream that is highly dependent on an asset owned by another firm, can be held up by the other firm's attempt to capture a large proportion of the rent stream of the combined assets. The owner of an improvement that contributes a very significant part of the value of the "original patent plus improvement" combination -- i.e., an improvement that represents a major technical advance -- is thus subject to "holdup" by the original patent holder.
n116 If the improvement would have been obvious to one skilled in the art, it will not be patentable at all. See 35 U.S.C. § 103 (1988).
n117 To see why this would be bad from society's point of view, consider this example. An original patent has a value of $100; an improvement, also worth $100, is invented, and its inventor wishes to obtain the right to use it by bargaining with the holder of the original patent. Here, the parties may well reach a bargain whereby the original patentee gains $50 of the value of the improvement and the improver keeps $50 of this gain, yielding a total allocation of $150 for the original patentee and $50 for the improver. (Of course, the gain may be greater if the original patentee is especially "strategic"; or it may be lower if she is exceptionally "fair"; or the parties might not reach any agreement at all, and the improvement will have to wait until the original patent expires; but the fifty-fifty allocation is a good approximation, based on empirical findings. See H. Raiffa, The Art and Science of Negotiation 48 (1982) (empirical research showing the best predictor of final agreement price was the midway point between the opening offers of sellers and buyers).) Depending of the cost of developing the improvement, this may tend to reduce the incentives to invent improvements below the optimal level, since the improver keeps only $50 of the $100 in extra value generated by the improvement. But it is a reasonable result in this case given the strong policy in favor of preserving the reward for the original patentee and, thus, incentives for future original patentees. But where the improvement adds value of $900, compared to the original patent's value of $100, the holdup problem becomes acute. Here, if the parties bargain for an equal allocation of the improvement's value, the improver keeps only $450 of the total value of the improvement. The reduced incentives to invent such substantial improvements are obvious from this example; not even the strong policy favoring incentives for the original patentee to invent can justify such a "windfall" to the original patentee at the expense of the improver. Note also that the social cost in those cases where the parties cannot agree, and where the very significant improvement therefore sits on the shelf for the life of the original patent, is by definition great. Such "deadlocks" do occur, and in fact a certain number of them are predictable where the bargaining parties are acting rationally. See Cooter, Marks & Mnookin, Bargaining in the Shadow of the Law: A Testable Model of Strategic Behavior, 11 J. Legal Stud. 225, 226 (1982).
n118 In fact, the most efficient way to deal with the problem would probably be a system of compulsory licensing, whereby the improver would pay a "fair" royalty to the original patentee. This is not part of U.S. patent law, however. See supra notes 6-7 and accompanying text. Current patent law in fact leaves us with two "second-best" alternatives: finding infringement or finding no infringement. Thus the account of the reverse doctrine of equivalents given here is meant to be an explanation of how to work with our admittedly second-best system. A similar problem arises when a firm must use a patented product or process to invent an improved version. Even where the improved version does not incorporate the patented invention, the mere use of it to create the improved version is an infringement. The defense of "experimental use" can be involved by one accused of infringement under these circumstances, but the precise contours of that defense, which is derived solely from case law, are unclear. For an excellent recent article, which calls for a rationalized and expanded experimental use defense for many of the same reasons we advocate favoring a competitive environment for improvement inventions, see Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. Chi. L. Rev. 1017, 1070-74 (1989). An expanded experimental use exemption would likely have a major impact on biotechnology, where there is much experimentation in an attempt to improve various products. See Eisenberg, Proprietary Rights and the Norms of Science in Biotechnology Research, 97 Yale L.J. 177, 225 n.242 (1987) (describing possible experimental use defense in Scripps Clinic & Research Found. v. Genentech, Inc., 666 F. Supp. 1379, 3 U.S.P.Q.2d (BNA) 1481 (N.D. Cal. 1987), a defense that appeared to be relevant but was not used by Genentech). For a recent proposal to create compulsory licensing when a patented invention must be used to make an improved version, see Feit, Biotechnology Research and the Experimental Use Exception to Patent Infringement, 71 J. Pat. & Trademark Off. Soc'y 819, 840 (1989).
n119 Assertion of a holdup right may be inefficient in three ways: first, it may prevent the improvement from being introduced until the original patent expires; second, it may cause a delay shorter than the full patent term, e.g., because of litigation or bargaining time; and third, it may lead to higher cost to the consumer. In this connection, it is worth noting that many studies find that the social returns to particular innovations far exceed the private returns; thus society as a whole may well bear the greatest efficiency loss. See, e.g., Bernstein, The Structure of Canadian Inter-Industry R&D Spillovers, and the Rates of Return to R&D, 37 J. Indus. Econ. 315 (1989) (social rates of return at least twice private rates for industries studied); Bresnahan, Measuring the Spillovers from Technical Advance: Mainframe Computers in Financial Services, 76 Am. Econ. Rev. 742, 753 (1986) (very large social gain from mainframe computers, 1.5 to 2.0 orders of magnitude above cost of inventing them); Evenson & Kislev, Research and Productivity in Wheat and Maize, 81 J. Pol. Econ. 1309 (1973) (social return up to 300% greater than private return); Griliches, Research Expenditures, Education, and the Aggregate Agricultural Production Fundtion, 54 Am. Econ. Rev. 961, 965-68 (1964) (social rate of return on agricultural research is at least 150% greater than private rate of return to researchers); Mansfield, Rapoport, Romeo, Wagner & Beardsley, Social and Private Rates of Return from Industrial Innovations, 91 Q.J. Econ. 221, 234 (1977) (concluding that median estimated social rate of return on seventeen major product innovations was 26 percentage points greater than the medium pretax private rate of return).
n120 Perhaps it is even more useful in that context. Because the doctrine of reverse equivalents applies only where there is literal infringement, the improvement at issue has to be very significant to qualify for infringement immunity under the reverse doctrine of equivalents. If literal infringement were often excused, the original patentee would not have much faith in the value of her patent; this might significantly reduce her incentive to invent in the first place. But where the improvement allegedly infringes only under the doctrine of equivalents -- a less certain area of the original patentee's scope -- there will likely be less of an impact on the original inventor's incentives. So doctrine can be more sensitive to the degree of advance represented by the improvement where it allegedly infringes under the doctrine of equivalents. In terms of the model given in this section, the doctrine of equivalents -- as opposed to reverse equivalents -- can be used to remedy a greater number of potentially inefficient holdups by original patentees.
n121 Westinghouse v. Boyden Power Brake Co., 170 U.S. 537, 572 (1898). Judge Newman of the Federal Circuit has acknowledged that the reverse equivalents doctrine "is invoked when claims are written more broadly than the disclosure warrants." Texas Instruments v. United States Int'l Trade Comm'n, 846 F.2d 1369, 1372, 6 U.S.P.Q.2d (BNA) 1886, 1889 (Fed. Cir. 1988).
Kaplow, supra note 123, at 1828 n.35.
n122 W. Nordhaus, supra note 3.
n123 See Kaplow, The Patent-Antitrust Intersection: A Reappraisal, 97 Harv. L. Rev. 1813, 1855-67 (1984). Compared with other economic analyses of restrictive licensing practices, Kaplow's approach differs in that he is careful to emphasize the net social benefits of granting a particular patent. Kaplow criticizes Bowman and Baxter for relying on the notion that the individual inventor should be given a patent and allowed to license it using restrictive practices if that inventor's reward is less than or equal to the value of her invention to society. Id. at 1849-54. "Such a view," according to Kaplow, "incorrectly focuses on total social benefits, rather than net social benefits (the excess of total benefits over total costs)." Id. at 1828. Kaplow thus structures his analysis of an optimal system so as to take account of the social cost of granting a patent or permitting a restrictive practice.
n124 See R. Gilbert & C. Shapiro, supra note 2, at 2.
Increasing the breadth of the patent typically is increasingly costly, in terms of deadweight loss, as the patentee's market power grows. When increasing the length of the patent, by contrast, there is a constant tradeoff between the additional reward to the patentee and the increment to deadweight loss . . . . So, the socially cost-effective way to achieve a given reward to innovators is to have infinitely-lived patents with enough breadth to attain the required reward level.
Id.; P. Klemperer, supra note 2, at 2 ("Since any single prize . . . will induce the same r&d activities, we can equivalently think of choosing [patent length and breadth] to minimize the social cost stemming from the resulting monopoly provision rather than the perfectly competitive provision of a new product . . . .").
n125 For an overview of work in this area, see M. Kamien & N. Schwartz, Market Structure and Innovation 105-12 (1982).
n126 See, e.g., Lippman & McCardle, Dropout Behavior in R&D Races with Learning, 18 Rand J. Econ. 287 (1987). See supra notes 12-14 and accompanying text. Note that in his article on restrictive licensing practices Kaplow leaves room for a consideration of some long-term effects:
The possibility of adverse effects from long-run changes in market structure occurring over the patent life adds another element to aggregate social cost and reinforces [my] conclusion about the relation of private to social benefits [i.e., that private benefits will exceed social benefits due to the presence of social costs not borne by the patentee].
Kaplow, supra note 123, at 1828 n.35.
n127 See supra note 124.
n128 At least insofar as both length and scope enter into the "tradeoff" analysis. Note, however, that broad claims influence who will be involved in further work in the technology and on what terms. This is different from giving a patent holder a long time to control a particular invention, as Gilbert and Shapiro note. See R. Gilbert & C. Shapiro, supra note 2, at 2 (explaining that their model focusses on patent scope because increases in scope have greater preclusive effect than increases in length).
n129 See R. Gilbert & C. Shapiro, supra note 2, at 4-5 (effect of substitutes on price patentee can charge); P. Klemperer, supra note 2, at 3 (modelling cost of precluded substitutes by picturing consumers travelling along a product distribution line (Hotelling model)). The article by McFetridge & Rafiquzzaman, supra note 2, raises the same general problem. These authors argue that the greater the degree of postpatent competition, or potential competition, the greater the price discipline on the innovator. The degree of competition is dependent on the scope of protection given to the innovator. In this model competition eats into the percentage of cost savings brought about by the innovator's invention. See id. at 104. This model points generally to the same conclusions reached in the Gilbert and Shapiro paper. But note that it considers only the effect of patents on the development of substitutes for that patented technology and not the effect of the patent on improvements and extensions of the patented technology. It is in this sense still more static than dynamic in its approach and, hence, different from the view taken here.
n130 But cf. R. Gilbert & C. Shapiro, supra note 2, at 7-8 (cautioning in conclusion that infinitely-lived patents, with reward adjusted solely by variations in scope, could "retard subsequent innovation by establishing monopoly rights to an entire line of research").
n131 See, e.g., Barzel, Optimal Timing of Innovations, 50 Rev. Econ. & Statistics 348 (1968); Dasgupta & Stiglitz, Uncertainty, Industrial Structure and the Speed of R & D, 11 Bell J. Econ. 1 (1980); Wright, The Resource Allocation Problem in R & D, in The Economics of R & D Policy 41 (G. Tolley ed. 1985).
n132 See, e.g., Tandon, Rivalry and the Excessive Allocation of Resources to Research, 14 Bell J. Econ. 152 (1983); Wright, supra note 131.
n133 See, e.g., Dasgupta and Stiglitz, supra note 131; Lee & Wilde, Market Structure and Innovation: A Reformulation, 94 Q.J. Econ. 427 (1980); Scherer, Research and Development Resource Allocation Under Rivalry, 81 Q.J. Econ. 359 (1967). For recent treatments of the topic, see Lippman & McCardle, supra note 126; see also Wright, supra note 131, at 41, 49-56 (describing the relationship between the general common pool model and what we call "race" models: "The dissipation of the benefits of research before the socially optimal time . . . is a dynamic intertemporal version of the same type of market failure [described in the common pool models].").
n134 See, e.g., Dasgupta, Patents, Priority and Imitation or, The Economics of Races and Waiting Games, 98 Econ. J. 66 (1988) (exploring conditions that make waiting more profitable than entry in races to invent); Katz & Shapiro, R & D Rivalry with Licensing or Imitation, 77 Am. Econ. Rev. 402 (1987) (exploring effects of post-invention dissemination, i.e., licensing or imitation, on two-firm strategic race to invent).
n135 Kitch, supra note 12, at 276-77.
In some respects, William Kingston's idea of an "innovation warrant" is similar to the "breathing room" aspect of the prospect theory. Kingston, The Unexploited Potential of Patents, in Direct Protection of Innovation 1, 1-34 (W. Kingston ed. 1987). What Kingston has in common with Kitch is a focus on incentives to develop markets. But Kingston's proposal is to give patent-like "innovation warrants" to the first firm to commercialize even a minor innovation. This, of course, differs from Kitch, who implicitly assumes the desirability of maintaining the patent system's current focus on technological advance, rather than on mere market innovation.
n136 Kitch, supra note 12, at 279.
n137 Kitch notes that U.S. mining law performs these two functions as well. Id. at 271-75.
n138 Id. at 286.
n140 The concept originated with the economist Herb Simon. See Simon, Theories of Decision-Making in Economics and Behavioral Science, 49 Am. Econ. Rev. 253, 262-65 (1959); see also J. March & H. Simon, Organizations 140-41 (1958) (most decision making concerned with discovery and selection of satisfactory, rather than optimal, alternatives). This view is reflected in the work of some analysts of innovation:
The sluggishness of large firms in certain innovations has been explained by the desire to protect an investment in the then-current technology, satisfaction with the status-quo, underestimation of the potential demand for a new item, neglect of the inventor, and misdirection of research, as well as by incompatibility of bureaucracy and creativity.
M. Kamien & N. Schwartz, supra note 125, at 68. See generally R. Brenner, Rivalry in Business, Science, Among Nations 1-28 (1987). Brenner describes a broad and somewhat iconoclastic view of entrepreneurship as an activity brought on by frustration and adversity -- the need to take a gamble. He points out that an increase in rivalry can bring about these conditions, and thus ties increased rivalry and competition to increased innovation.
n141 The transition from entrepreneur to established, cautious firm can be breathtakingly fast. An historian who studied the beginning of the electrical lighting industry in the U.S. pointed out that in ten years, Thomas Edison moved from a maverick trying to get incandescent lighting accepted as feasible to a staunch opponent of the "dangerous" innovation of alternating current. H. Passer, The Electrical Manufacturers 1875-1900, at 174 (1953). The same phenomenon has been noted repeatedly. See, e.g., Scherer, Invention and Innovation in the Watt-Boulton Steam-Engine Venture, 6 Tech. & Culture 165, 174 (1965), quoting a letter from James Watt, inventor of the steam engine, to his partner James Boulton:
On the whole I find it is now full time to cease attempting to invent new things, or to attempt anything which is attended with any risk of not succeeding . . . . Let us go on executing the things we understand, and leave the rest to younger men, who have neither money nor character to lose.
See also M. Kamien & N. Schwartz, supra note 125, at 74-75 (examining alternative explanations of why innovators stop innovating).
n142 See R. Nelson & S. Winter, An Evolutionary Theory of Economic Change, passim (1982).
n143 See R. Nelson & S. Winter, supra note 142, at 389. To the extent that the holder of a broad patent has market power, it is relevant to note that analysts of monopoly power often remark on the monopolist's reduced incentives to innovate. See K. Arrow, Economic Welfare and the Allocation of Resources for Invention, in The Rate and Direction of Inventive Activity 609, 619-22 (R. Nelson ed. 1962) (concluding from model that monopolist's incentive to innovate is lower than inventor in competitive industry); M. Kamien & N. Schwartz, supra note 125, at 29-30:
The firm presently realizing monopoly profits may be less motivated to seek additional profits than one earning only normal profits. It may, in other words, be less hungry for additional profits than the firm without a monopoly position. Several reasons for this are possible. First, it may begin to regard additional leisure as superior to additional profits . . . . Second, it may become more concerned with protecting its current monopoly position than in acquiring a new one.
n144 Invention and innovation are notoriously uncertain activities. C. Freeman, The Economics of Industrial Innovation 148-50 (2d ed. 1982); E. Mansfield, J. Rapoport, J. Schnee, S. Wagner & M. Hamburger, Research and Innovation in the Modern Corporation 9-10 (1971).
n145 As discussed earlier, many improvements are patentable, a fact that demonstrates the independent inventive contribution necessary to make a significant improvement. See supra notes 96-99 and accompanying text. A study of the history of innovations in almost any field will show the key importance of improvement inventions. One good source of such studies is E. von Hippel, The Sources of Innovation 131-207 (1988) (innovation histories of ten industries). See, for example, von Hippel's description of innovations in scientific instruments, several of them patented. He describes the invention of the gas chromatograph, id. at 133-35; then details the improvements in temperature programming, id. at 135; capillary columns, id. at 135; silanization ("[a] major step forward"), id. at 136; argon ionization (patented), id. at 138; electron capture detector, id. at 139; flame ionization detector (patented), id. at 139; mass spectrograph linkage (patented), id. at 140; and process control interface, id. at 141. Likewise, von Hippel describes the invention of nuclear magnetic resonance (NMR) imaging, id. at 143, then describes fourteen major improvements, id. at 145-53. The same pattern holds true for all his innovation histories. Although von Hippel does not directly compare the difficulty -- hence cost -- of improvement inventions, it is clear from his descriptions that many of the improvements were significant technical achievements. Thus cost and difficulty can be inferred.
n146 See, e.g., F. Contractor, International Technology Licensing: Compensation, Costs, and Negotiation 104-05 (1981) (transaction costs averaged over $100,000 for licensing deals studied); D. Teece, The Multinational Corporation and the Resource Cost of International Technology Transfer 44 (1976) (transfer costs constituted over 19% of total project costs in international projects studied); E. von Hippel, supra note 145, at 48 (summarizing empirical studies finding generally low net returns from licensing). More subtle transaction costs, such as possible opportunistic behavior, are described in F. Bidault, Technology Pricing: From Principles to Strategy 126-27 (B. Page & P. Sherwood trans. 1989), and Teece, Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy, 15 Res. Pol'y 285, 294 (1986).
n147 In addition to the studies by Teece and Contractor cited supra note 146, this point is illustrated by the terms of a broad cross-licensing agreement between DuPont and Imperial Chemical Industries, Ltd., of Great Britain. The agreement provided for blanket licensing of all patents owned by the two companies (one of the reasons it was found to have masked a cartel, see infra note 338), but "there was a clause allowing either party to remove a 'major invention' from the agreement altogether, so that they could make special terms." 2 W. Reader, Imperial Chemical Industries: A History 52-53 (1975).
n148 Caves, Crockell & Killing, The Imperfect Market for Technology Licenses, 45 Oxford Bull. Econ. & Statistics 249,260-62 (1983). A group led by Edwin Mansfield of the University of Pennsylvania reached the same general conclusion after conducting a similar empirical study. See E. Mansfield, A. Romeo, D. Teece, S. Wagner & P. Brach, Technology Transfer, Productivity, and Economic Policy (1982).
n149 Kitch, supra note 12, at 273 (footnote omitted).
n150 Id. See 30 U.S.C. §§ 23, 36 (1988); Hubbard, Drafting Private Agreements Relating to Public Lands, 3 Nat. Resources & Env't 9, 10 (1988).
n151 See 30 U.S.C. §§ 23, 35; Comment, The General Mining Law and the Doctrine of Pedis Possessio: The Case for Congressional Action, 49 U. Chi. L. Rev. 1026, 1027 n.6 (1982).
n152 Before a claim can be filed under federal law, one must identify a mineral deposit. 30 U.S.C. § 23. See Thomas v. Morton, 408 F. Supp. 1361 (D. Ariz. 1976), aff'd sub nom. Thomas v. Andrus, 552 F.2d 871 (9th Cir. 1977) (per curiam).
n153 30 U.S.C. § 28.
n154 State law protection is carried out under the doctrine of pedis possessio. See Comment, supra note 151, at 1032-46. On the work requirement and the closely related requirement of actual occupancy under this doctrine, see id. at 1033-34. In his study on the evolution of property rights among prospectors during the California Gold Rush, John Umbeck observes that even the earliest contracts establishing such rights included limitations on claim size and minimum working requirements. J. Umbeck, A Theory of Property Rights With Application to the California Gold Rush 91-98 (1981).
n155 The literature on common fisheries suggests that a similar consideration influences the design and allocation of fishing rights. This literature details a number of formal and informal limitations on the scope of fishing rights that are either in effect or have been proposed. See Charles, Fishery Socioeconomics: A Survey, 64 Land Econ. 276, 279-80 (1988); see also Clark, Major & Mollett, The Development and Implementation of New Zealand's ITQ Management System, in Rights Based Fishing 117, 128 (P. Neher, R. Arnason & N. Mollett eds. 1989) (describing New Zealand fish stock management system, which solves common pool overfishing problem by granting to fishermen "Individual Transferable Quotas" (ITQs), limited in scope by the volume of past catches); Gardner, The Enterprise Allocation System in the Offshore Groundfish Sector in Atlantic Canada, in Rights Based Fishing, supra, at 293, 299, 319 (describing similar allocation system based on historical catches in Canadian fishing industry, which made "[t]he race for fish . . . a thing of the past").
n156 See, e.g., Coase, The Problem of Social Cost, 3 J.L. & Econ. 1 (1960); H. Demsetz, Toward a Theory of Property Rights, in 1 Organization of Economic Activity 104 (1988).
n157 See H. Demsetz, supra note 156, at 112-13 (discussion of bargaining using example of patents); see also Anderson, Conceptual Constructs for Practical ITQ Management Policies, in Rights Based Fishing, supra note 155, at 191, 196 (concluding that the market for randomly-allocated ITQs would lead to efficient allocation via trading among firms).
n158 See R. Cooter & T. Ulen, Law and Economics 105 n.15 (1988).
n159 Consider a numerical example. Suppose an inventor has expected profit of $1000 from a pioneering invention. An improver has developed a modification which the improver expects will bring profits of $400. But the improver's entry into the market will reduce the pioneer's profits by $300 because the improvement substitutes for some component in the pioneer's product, reduces the need for replacement parts or the like. If the pioneer's patent covers the improvement, the improver must take out a license. If this is known in advance, the pioneer will demand to be compensated out of the improver's profits for its $300 loss in profits. The improver's expected profit -- after paying a royalty to the pioneer under the license -- will be only $100. But if the pioneer's rights do not cover the improvement, the improver can market it without a license from the pioneer. Then the improver's expected profit will once again be $400. It is important to note two things about this example: first, it demonstrates the increased incentives for improvements when initial rights are narrow. But second, it also clearly demonstrates the cost of narrow scope -- a reduced incentive for the pioneer to innovate in the first place. (Note that with narrow rights, the pioneer's expected profits drop from $1000 to $700 after the improver enters without taking out a license.) In fact, taken to its logical conclusion, this is an argument for no patent rights at all, clearly the wrong result. Consequently it is important to restate one point: We are not advocating extremely narrow rights, designed to maximize the incentives to improve; we are arguing that, in close cases where scope doctrines are at issue, decision makers should opt for narrow scope to advance the important interests of society in encouraging improvements.
n160 In fact, it is the positive-sum aspects of allowing more competition for improvements that lead us to advocate narrowing the scope of the initial inventor's patent. In addition, of course, are the well-known problems of transaction costs; it seems whimsical to assume that all improvers and potential improvers will be able to bargain with the holders of pioneering patents. Imagine the magnitude of these costs: identifying all the prospective improvers; agreeing on the value of the pioneering invention and the expected value of the improvement; and finding an acceptable division of profits from the "surplus" created when the improvement is combined with the pioneer invention. For some background on the strategic aspects of licensing transactions, see F. Bidault, supra note 146, 83-137; see also Meurer, The Settlement of Patent Litigation, 20 Rand J. Econ. 77,77 (1989) ("patent validity disputes are not always resolved with licensing agreements because of incentive problems created by private information about validity"). For a heroic effort to imagine a world where these costs are manageable, see Yu, A Contractual Remedy to Premature Innovation: The Vertical Integration of Brand-Name Specific Research, 22 Econ. Inquiry 660 (1984) (arguing that (1) current property rights encourage "rushing" of innovation, and (2) a contractual solution exists whereby manufacturers form pre-invention contracts with prospective inventors). On the effect of multiple bargainers, see generally Cooter, Coase Theorem, in 1 The New Palgrave: A Dictionary of Economics 457, 458 (1987) (example of many farmers in Coase's famous farmer-railroad bargaining hypothetical). Without such bargaining the exchange mechanism on which the property rights literature relies so heavily cannot work. It is worth noting in this regard that even in the property rights-based fish harvest schemes described above, the scope of initial entitlements is carefully crafted. See, e.g., Gardner, supra note 155, at 298.
n161 For a general discussion, see Nelson, Capitalism as an Engine of Progress, Res. Pol'y (forthcoming).
n162 See, e.g., Griliches, Introduction, in R & D, Patents, and Productivity 1, 17 (Z. Griliches ed. 1984) (listing several problems concerning the ability to detect the major effects of research and development on productivity). One issue that is prior to these -- and that to some is still undecided -- is whether growth should be the goal of an economic system at all. See generally H. Arendt, The Rise and Fall of Economic Growth (1978) (intellectual history of the economic concepts of progress, growth, and development). For a summary of criticisms of growth, see id. at 84-97.
n163 See, e.g., Pakes & Griliches, Patents and R & D at the Firm Level: A First Look, in R & D, Patents & Productivity, supra note 162, at 55. Of course, one might argue that narrowing patent scope at the margin will redirect investment away from pioneering inventions and toward improvements on existing products. But two factors mitigate this. First, reducing scope at the margin will not completely eliminate the advantages of a pioneering invention over an improvement. Even without patents, pioneering inventions can lead to much higher returns than mere improvements. Second, narrower scope does not mean that pioneering inventions have only the scope of an improvement. There is still a good deal of difference between a narrower-at-the-margins pioneering patent and a mere improvement patent.
n164 See, e.g., F. Scherer, Innovation and Growth: Schumpeterian Perspectives 257-59, 270-85 (1984).
n165 A. Link & G. Tassey, Strategies for Technology-Based Competition 7 (1987); D. Jorgenson, Microeconomics and Productivity, in The Positive Sum Strategy: Harnessing Technology for Economic Growth 57, 57-76 (R. Landau & N. Rosenberg, eds. 1986); cf. H. Arendt, supra note 162, at 142-51 (describing the strong consensus in favor of economic growth).
n166 A noted economist who studied technical change made a related point. Machlup, The Optimum Lag of Imitation Behind Innovation, in Selected Economic Writings of Fritz Machlup 485, 502 (G. Bitros ed. 1976) (concluding that "longer imitation lags are uneconomical . . . , [but] no reliable clue has turned up as to the length of the optimum lag"). There has been some debate, however, over the question of the optimal timing of innovations and improvements. See, e.g., F. Scherer, supra note 164, at 67-82; Nelson, Uncertainty, Learning, and the Economics of Parallel Research and Development Efforts, 43 Rev. Econ. & Statistics 351 (1961). But note that this literature studies optimal timing from the point of view of the innovating firm; from society's point of view, there may be additional advantages to sooner rather than later.
n167 See 35 U.S.C. § 102(g) (1988).
n168 See 3 D. Chisum, supra note 45, § 10.03 (describing priority of invention rules, noting that first to reduce to practice is prima facie true inventor, and other inventors who wish to claim priority must prove earlier date of conception).
n169 See 35 U.S.C. § 102(b) (person entitled to patent unless, inter alia, invention was published, used or sold more than one year before application was filed).
n170 On cumulative industries, see R. Nelsond & S. Winter, supra note 142, at 255-62.
n171 See supra notes 25-29 and accompanying text.
n172 See J. Jewkes, D. Sawers & R. Stillerman, The Sources of Invention 234-35 (2d ed. 1969).
n173 See E. von Hippel, supra note 145, at 53 ("[T]he mechanisms by which pharmaceuticals achieve their medical effects are often not well understood. When this is so, potential imitators cannot gain much helpful insight from examining a competitor's patented product.").
n174 See, e.g., Graham v. John Deere Co., 383 U.S. 1, 26, 148 U.S.P.Q. (BNA) 459 (1966) (invalidating patent on spray pump bottle with hold-down cap); K. Brown, Inventors at Work; Interviews with 16 Notable American Inventors 366-68 (1988) (interview with Nat Wyeth, inventor of the plastic soda bottle).
n175 See, e.g., Moleculon Research Corp. v. CBS, Inc., 872 F.2d 407, 10 U.S.P.Q.2d (BNA) 1390 (Fed.Cir. 1989) (finding no infringement of patent on "Rubik's Cube").
n176 Ballpoint pens, for instance, involve basically a barrel, the point and ink. Note that even here, however, improvement inventions are possible -- just not very many of them, compared to cumulative technologies. See, e.g., J. Jewkes, D. Sawers & R. Stillerman, supra note 172, at 235 (describing invention of quick-drying ink by inventor unaffiliated with ballpoint pen inventors). Thus even ballpoint pens have some of the qualities of a cumulative technology -- demonstrating the difficulties of any classification scheme along this dimension. Nevertheless, overall, they must be characterized as a discrete technology.
n177 See R. Nelson & S. Winter, supra note 142, at 255-62; see also D. Sahal, Patterns of Technological Innovation 37 (1981) (describing cumulative nature of technical advance in aluminum products, electrical generation, petroleum refining and synthetic fiber production); Levin, Appropriability, R&D Spending, and Technological Performance, 78 Am. Econ. Rev. 424, 427 (1988) (contrasting chemical and drug industries prior to advances in genetic engineering -- which the author uses as examples of discrete technologies -- with "cumulative industries" such as electronics). It should be noted that at least one analyst of technical change sees all technical progress as the process of cumulative change. See D. Sahal, supra, at 112.
n178 See, e.g., S. Hollander, The Sources of Increased Efficiency: A Study of DuPont Rayon Plants 203-04 (1965) (concluding that "minor" improvements "accounted for over two-thirds of the unit-cost reductions attributable to technical change at most of the plants considered"); Enos, A Measure of the Rate of Technological Progress in the Petroleum Refining Industry, 6 J. Indus. Econ. 180, 187 (1958) (emphasizing the cumulative quantitative importance of small improvements in petroleum refining processes).
n179 A good description of the nature of invention can be found in the innovation histories of the industries studied by Eric von Hippel that we would classify as cumulative. See E. von Hippel, supra note 145, at 163-82 (semiconductors); id. at 188-95 (tractor shovels). The latter series of innovations are, of course, only one component in the overall composition of farm tractors. See D. Sahal, supra note 177, at 132-36.
n180 See, e.g., Dosi, Technological Paradigms and Technological Trajectories: A Suggested Interpretation of the Determinants and Directions of Technical Change, 11 Res. Pol'y 147 (1982).
n181 For example, the semiconductor industry supplies an essential component for electronics, automobiles and many other products. See T. Howell, et al., The Microelectronics Race 4-13 (1988).
n183 See supra notes 96-121 and accompanying text.
n184 See supra note 97 and accompanying text.
n182 See infra notes 191-222 and accompanying text.
n183 See supra notes 96-121 and accompanying text.
n184 See supra note 97 and accompanying text.
n185 C. Taylor & Z. Silberston, The Economic Impact of the Patent System: A Study of the British Experience 252 (1973) ("unpredictability [of the behavior of chemicals in the human body] is of a much higher order than that found in non-biological areas of chemical research -- and very much higher than that in engineering fields"); 2 D. Chisum, supra note 45, § 5.04, at 5-312 ("[A] newly-synthesized compound may be very similar in structure to known and existing compounds and yet exhibit very different properties."). Several of the rules governing chemical patents reflect the inability routinely to predict function given a certain chemical structure. See, e.g., In re Papesch, 315 F.2d 381, 386-89, 137 U.S.P.Q. (BNA) 43, 47-50 (C.C.P.A. 1963) (describing chemical obviousness doctrine whereby compound's structural similarity to prior art raises presumption that compound is obvious that can be overcome by evidence that claimed compound exhibits new and unexpected properties); In re Fisher, 427 F.2d 833, 839, 166 U.S.P.Q. (BNA) 18, 24 (C.C.P.A. 1970) ("In cases involving unpredictable factors, such as most chemical reactions and physiological activity, the scope of enablement obviously varies inversely with the degree of unpredictability of the factors involved."). On this latter point, see supra note 68 (discussion of Patent Office rules on enablement in various arts).
n186 See, e.g., D. Hounshell & J. Smith, Science and Corporate Strategy: DuPont R&D, 1902-1980, at 480-81 (1988) (describing applications of Du Pont's polyethylene in all segments of the plastics market); id. at 482-86, 708 n.42 (describing wide ranging applications for polytetrafluoroethylene, tradename Teflon).
n187 See R. Nelson & S. Winter, supra note 142, at 334-37; Dosi, supra note 180, at 148-49 (description of science-based industries using a different industry taxonomy).
n188 Other examples of science-based industries include medical diagnostic equipment (e.g., nuclear magnetic resonance), lasers, and the still nascent superconductor industry. See generally M. Kenney, Biotechnology: The University-Industrial Complex (1986); Kenney, Schumpeterian Innovative and Entrepreneurs in Capitalism: A Case Study of the U.S. Biotechnology Industry, 15 Res. Pol'y 21 (1986) (describing role of scientists, as well as entrepreneurs and capitalists).
n189 See, e.g., the description of the commercial development of diagnostic testing kits using monoclonal antibodies, infra notes 307-313 and accompanying text.
n190 In theory, the nonobviousness requirement of 35 U.S.C. § 103 (1988) will prevent such obvious inventions from receiving patents. In practice, for a variety of reasons, this requirement does not always function properly. See Merges, Commercial Success and Patent Standards: Economic Perspectives on Innovation, 76 Calif. L. Rev. 803, 857-58 (1988) (discussing invention of monoclonal antibody in critique of nonobviousness doctrine).
n191 H. Passer, supra note 141, at 152.
n192 Edison Elec. Light Co. v. United States Elec. Lighting Co., 47 F. 454 (C.C.S.D.N.Y. 1891), aff'd, 52 F. 300 (2d Cir. 1892).
n193 See A. Bright, The Electric-Lamp Industry: Technological Change and Economic Development from 1800 to 1947, at 89 (1949).
n194 Id. at 89. See United States v. General Elec. Co., 82 F. Supp. 753, 771, 80 U.S.P.Q. (BNA) 195, 205 (D.N.J. 1949) (describing Edison patents and their "virtual monopoly of the domestic supply in electric lamps" from 1891 to 1894, in finding defendant liable for various antitrust violations).
n195 A. Bright, supra note 193, at 91, 92 (Table XI). The patent expired in 1894 -- instead of 1897, seventeen years after issue -- because a Canadian counterpart patent expired in 1894, and thus (under then-existing law), so did the U.S. patent. See id. at 91.
n196 Id. at 93.
n198 Id. at 108.
n199 Id. at 122.
n200 Id. at 122-23. See M. MacLaren, The Rise of the Electrical Industry During the Nineteenth Century 79 (1943) (describing corporate alliances in early electrical industry resulting from patent blockages); H. Passer, supra note 141, at 324-25 (describing extensive patent blockages leading to merger of Edison General Electric and the Thomson-Houston Company to form General Electric).
n201 A. Bright, supra note 193, at 138.
n202 Id. at 138-39. On General Electric's need to catch up technologically after the Edison patent expired in 1894, see T. Hughes, American Genesis: A Century of Invention and Technological Enthusiasm, 1870-1970, at 166-67 (1989). For a desciption of organizational complacency, and the "shocks" that can break a firm out of a comfortable torpor, see Cyert & March, Organizational Structure and Pricing Behavior in an Oligopolistic Market, 45 Am. Econ. Rev. 129 (1955) (firms with suddenly declining market shares strove more vigorously to increase their sales than firms whose shares were steady or increasing). In another paper, Cyert and March provided an explanation: firms are complacent "until some form of shock (such as failing to meet its goals) forces a kind of search behavior on the organization." Cyert & March, Organizational Factors in the Theory of Oligopoly, 70 Q.J. Econ. 44, 54 (1956).
n203 H. Passer, supra note 141, at 41.
n204 See Gramme Elec. Co. v. Arnoux & Hochhausen Elec. Co., 17 F. 838 (C.C.S.D.N.Y. 1883).
n205 H. Passer, supra note 141, at 41.
n206 See A. Bright, supra note 193, at 109; A. Marcus & H. Segal, Technology in America: A Brief History 144 (1989) ("Brush's initial success in manipulating dynamos, circuits, and arc lamps . . . engendered competition and yielded improvements" from several competitors).
n207 Arc lights work because an electrical current will jump a gap between certain conductors. This is a different principle from the incandescent lamp, which casts light because the current meets resistance in the filament, causing the filament to glow. Arc lights are brighter; this is why they have been extensively used in outdoor lighting, for instance.
n208 Brush Elec. Co. v. Western Elec. Co., 69 F. 240, 246 (C.C.N.D. Ill. 1895), aff'd, 76 F. 761 (7th Cir. 1896). Another case previously had held that the Brush patent had been infringed by he same device at issue in the Western Electric case, but Brush apparently was unwilling to litigate the patent for a third time because the later Western Electric decision is the last regarding this patent. See Brush Elec. Co. v. Western Elec. Light & Power Co., 43 F. 533 (C.C.N.D.) Ohio 1890).
n209 H. Passer, supra note 141, at 42. See M. MacLaren, supra note 200, at 70-71 (describing the many investigators who were attempting to make improvements to the basic arc light design); D. Noble, America By Design: Science, Technology and the Rise of Corporate Capitalism 7 (1977) ("Neither the arc lamp nor the dynamo proved patentable in court tests, however, and, as a result, the manufacture of arc-lighting systems became fiercely competitive.") The Brush Company actually tried to establish patent dominance over another segment of the industry -- the market for replacement lamp carbons. This effort failed when, in 1887, its patent on copper-coated carbons was held invalid; once again, the result was an industry that "strongly resembled the economist's conception of pure competition . . . . " Id. at 62.
n210 See supra notes 31-34 and accompanying text.
n211 See, e.g., Wright Co. v. Herring-Curtiss Co., 204 F. 597 (W.D.N.Y. 1913), aff'd 211 F. 654 (2d Cir. 1914); Wright Co. v. Paulhan, 177 F. 261 (C.C.S.D.N.Y.) (L. Hand, J.), rev'd, 180 F. 112 (2d Cir. 1910); W. Kaiser & C. Stonier, The Development of the Aerospace Industry on Long Island: Financial and Related Aspects 4-11 (Hofstra Univ. Yearbook of Business, Series 5, vol. 4 1968); supra notes 31-34 and accompanying text.
n212 See Dykman, Patent Licensing Within the Manufacturer's Aircraft Association (MAA), 46 J. Pat. Off. Soc'y 646, 647 (1964) (describing formation of industry licensing pool at behest of government because, "[n]o one would license the other under anything like a reasonable basis"). The Curtiss-Wright dispute was the centerpiece of a larger patent logjam in the early aircraft industry. See W. Kaiser & C. Stonier, supra note 211, at 4-11.
n213 One can argue that the broad Selden patent should not have been granted in the first place. His critics argued that Selden never built or operated the automobile that was pictured and described in the specification. Of course, this is not a prerequisite to obtaining a patent. See 3 D. Chisum, supra note 45, § 10.05 (describing doctrine of constructive reduction to practice whereby filing patent application can constitute sufficient reduction to practice to merit priority of invention). His critics argued further that in any event Selden's claims exceeded what the specifications enabled. Cf. Electric Vehicle Co. v. C.A. Duerr & Co., 172 F. 923, 926 (C.C.S.D.N.Y. 1909), rev'd sub nom. Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893 (2d Cir. 1911); Electric Vehicle Co. v. Winton Motor-Carriage Co., 104 F. 814, 816 (C.C.S.D.N.Y. 1900). See generally J. Flink, America Adopts the Automobile, 1895-1910, at 318-19 (1970) (describing Selden's assignment of patent to the Electric Vehicle Company, whose motive was probably "to hedge against the possibility that the gasoline automobile might prove superior" to the electric vehicle being developed by the company).
n214 If they had used the patent for this purpose, we would expect to see a record of licensing agreements whereby firms specializing in various aspects of the automobile were given licenses and in turn were required to contribute or license their improvements back to Selden and his assignee. No such agreements seem to have been made, despite rapid progress in various aspects of automobile design. Cf. D. Hounshell, From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United States 274 (1984) (describing Ford's improvements in engines, electric starters, flywheels, etc.).
n215 In 1903, several years after the Selden patent survived its first challenge, Winton Motor-Carriage Co., 104 F. at 816, the Association of Licensed Automobile Manufacturers (ALAM) was formed. Until it was dissolved in 1911, following the first case finding that the Selden patent had not been infringed, the ALAM exercised some measure of control over the automobile industry through its power to deny licenses to new companies. See J. Flink, supra note 213, at 321.
n216 Id. Although controlling competition for improvements might be a part of an orderly development strategy, there is no evidence that the association was doing anything to develop the Selden "prospect." Thus its efforts to control competition look like naked restrictions on entry, not part of a coordinated development scheme.
n217 One historian of the industry states: That consumers were in some cases actually intimidated from buying the products of perfectly "good and reliable" but unlicensed manufacturers is . . . quite probable; certainly the advertisements of the A.L.A.M. attempted to accomplish this result. In response to the association's repeated warning "Do Not Buy a Lawsuit with Your Automobile," the Ford Company offered to give each purchaser a bond protecting him against any damages that might arise from this quarter.
R. Epstein, The Automobile Industry 233 (1928). As to Ford, the Selden patent did not stop him, but it did slow him down. See J. Flink, supra note 213, at 323-27 (describing Henry Ford's battle against the Selden patent).
n218 See Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893, 908-09 (2d Cir. 1911).
n219 See Wright Co. v. Paulhan, 177 F. 261, 271 (C.C.S.D.N.Y.) (L. Hand, J.), rev'd, 180 F. 112 (2d Cir. 1910); Zollmann, Patent Rights in Aircraft, 11 Marq. L. Rev. 216, 218-19 (1927).
n220 See Wright Co. v. Herring-Curtiss Co., 204 F. 597, 614 (W.D.N.Y. 1913) (finding that defendants' admittedly different design infringed plaintiff's broad pioneer patent on airplane stabilization), aff'd 211 F. 654 (2d Cir. 1914).
n221 See Bittlingmayer, Property Rights, Progress, and the Aircraft Patent Agreement, 31 J.L. & Econ. 227, 232 (1988).
n222 See W. Kaiser & C. Stonier, supra note 211, at 4-11; Bittlingmayer, supra note 221, at 236-40.
n223 See S. Sturmey, The Economic Development of Radio 16 (1958); H. Aitken, Syntony and Spark: The Origins of Radio 203-05 (1976).
n224 W. MacLaurin, Invention and Innovation in the Radio Industry 45 (1949) (acquisition of basic patent by Lodge on tuning, and issuance of major improvement patent to Marconi, the famous British 7777 patent and American equivalent, filed in 1900).
n225 Sturmey cites "a reliable opinion" as describing the Lodge tuning patent, acquired by Marconi, as "a master patent, or something very like it." S. Sturmey, supra note 223, at 17. Marconi's rights in the Fleming "valve" (vacuum tube) patent -- said to be basic to the whole art -- dated to its invention in 1904. See id. at 32.
n226 AT&T entered the radio field when it became concerned that radio could become a possible competitor to its long distance telephone line technology.
n227 See L. Reich, The Making of American Industrial Research: Science and Business at GE and Bell, 1876-1926 (1985) (triode invented by Lee De Forest). The history of the vitriolic interference between De Forest and Edwin Armstrong, who claimed priority of invention,is summarized in Radio Corp. of Am. v. Radio Eng'g Laboratories, 293 U.S. 1, 2-7 (1934). Many believed then, and still believe, that De Forest was wrongly given priority. See G. Douglas, The Early Days of Radio Broadcasting 12 (1987); McCormack, The Regenerative Circuit Litigation, 5 Air L. Rev. 282, 293-95 (1934).
n228 See G. Douglas, supra note 227, at 8.
n229 See W. MacLaurin, supra note 224, at 94.
n230 See G. Douglas, supra note 227, at 19-20.
n231 See Federal Trade Comm'n, Report of the Federal Trade Commission on the Radio Industry in Response to House Resolution 548, 67th Cong., 4th Sess., Dec. 1, 1923, at 27 (1924) [hereinafter FTC Report].
n232 Marconi Wireless Tel. Co. of Am. v. De Forest Radio Tel. & Tel. Co., 236 F. 942, 955 (S.D.N.Y. 1916), aff'd, 243 F. 560, 566-67 (2d Cir. 1917).
n233 See FTC Report, supra note 231, at 26.
n234 See supra notes 96-127 and accompanying text. De Forest's improvement was considered a major technical advance. Hugh Aitken stated the the invention of the triode "is one of the 'great divides' in the history of radio technology; the whole basis of radio communication begins to shift with the introduction and diffusion of this device." H. Aitken, The Continuous Wave: Technology and American Radio, 1900-1932, at 195 (1985) [hereinafter The Continuous Wave].
n235 This was the aborted attempt by Marconi to acquire General Electric's alternator technology, as embodied in the Alexanderson patent. This is perhaps anomalous, however, as General Electric might well have agreed to the transaction except for an appeal by the American military to keep this sensitive technology in the hands of domestic interests. See FTC Report, supra note 231, at 14-16. The U.S. Navy ultimately facilitated the formation of RCA, which broke the patent impasse. See infra notes 237-240 and accompanying text.
n236 See FTC Report, supra note 231, at 25:
The Navy, in a patent investigation in 1919, had "found that there was not a single company among those making radio sets for the Navy which possessed basic patents sufficient to enable them to supply, without infringement, . . . a complete transmitter or receiver."
n237 See The Continuous Wave, supra note 234, at 249 (impetus behind formation of RCA was that patent rights "threatened to impede further development and commercial exploitation"); S. Sturmey, supra note 223, at 275 (broad patents retarded growth of radio industry).
n238 General Electric, "[s]timulated by the Navy," actually formed the Radio Corporation of America (RCA) in 1919. W. MacLaurin, supra note 224, at 103; FTC Report, supra note 231, at 18-21.
n239 See FTC Report, supra note 231, at 20-21. RCA also entered into a cross-licensing agreement with General Electric. Id. at 21-22.
n240 RCA used package licenses coupled with high royalties to maintain its dominant position. See M. Graham, RCA and the VideoDisc: The Business of Research 41 (1986). Graham describes RCA's use of package licensing to dominate the radio industry from the 1920s until the antitrust enforcement actions of 1958:
Perhaps the most important enduring consequence of the policy was that it made it uneconomic for most other companies to do radio-related research, because they could not recoup their investment. This left control of the rate and direction of technological change in the radio industry largely in the hands of RCA.
n241 See United States v. Western Elec. Co., 1956 Trade Cas. (CCH) P68,246, at 71,137-138 (D.N.J. 1956).
n242 See Levin, supra note 86.
n243 Id. at 76.
n244 Id. at 80; J. Tilton, supra note 86, at 77.
n245 Levin, supra note 86, at 78.
n246 See N. Stern, From ENIAC to UNIVAC: An Appraisal of the Eckert-Mauchly Computers 2-4 (1981) (citing Honeywell, Inc. v. Sperry-Rand Corp., No. 4-67 Civ. 138 (Minn. Oct. 19, 1973)).
n247 See C. Taylor & Z. Silbertson, supra note 185, at 294-95.
n248 See generally K. Flamm, Targeting the Computer: Government Support and International Competition (1987).
n249 Cf. H. Aitken, supra note 223, at 308 (describing the development of the American radio industry as "speculative and erratic"); id. at 330 (describing lack of specialization in early days of radio development); id. at 333 (describing the early days of radio when the interactions between scientific, technological, and economic aspects of radio "were only dimly perceived and when institutions to cope with them had barely begun to evolve"). Hugh Aitken describes the progress from the early scientific work of Hertz to Fleming's diode as "highly empirical in nature, very much a matter of trial and error." Id. at 303.
n250 For example, the Patent Office interference action concerning the triode originally involved four inventors, two of whom -- Edwin H. Armstrong and Irving Langmuir of General Electric -- filed patent applications on the same day, October 29, 1913. See McCormack, supra note 227, at 282. And in 1915 Alexanderson's alternator became available for the first time. H. Aitken, supra note 223, at 281; W. MacLaurin, supra note 224, at 94. At the same time, AT&T was pioneering research in vacuum tubes. W. MacLaurin, supra note 224, at 95-96.
n251 Valuation problems in licensing transactions are difficult enough after an invention has been made; they would seem to be inconceivably difficult prior to invention. Cf. Meurer, supra note 160, at 80-84 (pointing out that patent validity disputes are not always resolved with licensing agreements because of asymmetric information about validity). It is therefore quite believable that ex ante coordination efforts would quickly break down since prospective inventors would likely value their future improvements more highly than the coordinating firm.
n252 See The Continuous Wave, supra note 234, at 389 n.5. Westinghouse is perhaps another plausible candidate; by acquiring rights to Armstrong's "regenerative circuit" (triode) patent, see W. MacLaurin, supra note 224, at 106, and an important signal generation patent, they had what appeared to be an infringement-free transmission system, but would have needed some rights to make vacuum tubes. The Continuous Wave, supra note 234, at 476-77.
n253 Work by Irving Langmuir of General Electric, an original party to the four-way interference over the triode, might have established some rights in this field. Cf. The Continuous Wave, supra note 234, at 231 (Langmuir's early work on triode amplification produced results superior to DE Forest's); id. at 248 (Langmuir part of original interference).
n254 GE almost acquired Armstrong's rights during the pendency of the interference, but he eventually sold them to Westinghouse. See W. MacLaurin, supra note 224, at 106.
n255 This is analogous to the strategic problem discussed earlier in the context of bargaining between the holder of a basic patent and the inventor of a very major improvement. See supra notes 115-120 and accompanying text.
n256 Note too that the savings in transaction costs accompanying consolidation must be weighed against the potential anticompetitive effects of the unified firm. See generally O. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications 155-233 (1975).
n257 See supra notes 221-237 and accompanying text.
n258 See supra notes 194-196, 199 and accompanying text.
n259 David Landes, the noted historian of technology, has called the business of chemical manufacture "the most miscellaneous of industries." D. Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present 269 (1969).
n260 See infra notes 171-180 and accompanying text; cf. Levin, supra note 177, at 427 (chemical and drug industries are discrete technology areas "in which innovations . . . stand alone as isolated discoveries").
n261 Most chemical claims cover a single compound only in the sense that Gillette's claim covered a single type of razor. That is, chemical claims routinely embrace minor variations on the basic structure the inventor discovered. For example, a patentee might claim a compound of structure "Atom 1-Atom 2- Sidegroup," where "Sidegroup" is defined in the claim as including either "N-O-O-H" or "N-H2." See Ex parte Markush, 1925 Dec. Comm'r Pats. 126, 128, 340 Off. Gazz. Pat. Off. 839 (1924); 2 D. Chisum, supra note 45, § 8.06. The "family" of variations must share a common principle to be patented using a so-called Markush claim; as stated in In re Schechter, 205 F.2d 185, 189, 98 U.S.P.Q. (BNA) 144, 149 (C.C.P.A. 1953), such a claim will be allowed "where the substances grouped have a community of chemical and physical characteristics which justify their inclusion in a common group, and such inclusion is not repugnant to the principles of scientific classification." Id. (citations omitted).
n262 Obviousness and enablement rules for chemical inventions reflect the accepted unpredictability of chemical inventions. See supra notes 194-197 and accompanying text; see also In re Bundy, 642 F.2d 430, 434, 209 U.S.P.Q. (BNA) 48, 51 (C.C.P.A. 1981) (finding sufficient support for patent specification despite absence of precise description of behavior of all analogs of compound); Studiengesellschaft Kohle mbH v. Eastman Kodak Co., 616 F.2d 1315, 1341, 206 U.S.P.Q. (BNA) 577, 600 (5th Cir.) ("[I]n catalytic chemistry, minor changes in components, their ratio, or the external condition of the reaction may produce major changes in the reaction itself."), cert. denied, 449 U.S. 1014, 208 U.S.P.Q. (BNA) 88 (1980).
n263 See C. Taylor & Z. Silberston, supra note 185, at 244-45; see also E. von Hippel, supra note 145, at 66-67 (describing unusual strength of patents in pharmaceutical and chemical industries relative to other industries).
n264 C. Taylor & Z. Silberston, supra note 185, at 268: The range of [bulk] products has not widened very much over half a century, although naturally their relative importance has greatly changed. Most research efforts are directed towards the reduction of unit costs and improvements in the purity and consistency of standard products. There is relatively little work on new products . . . .
n265 See, e.g., infra notes 268-271 and accompanying text (example of alkali process inventions).
n266 See, e.g., infra note 272 and accompanying text. This is a function of the unpredictability of chemical inventions. For example, enablement doctrine requires greater support for a broad chemical claim than for a broad mechanical claim. See supra notes 38 and 180-181 and accompanying text. On the other hand, this same feature of chemical inventions makes it easier to establish nonobviousness. See, e.g., In re Papesch, 315 F.2d 381, 391-92, 137 U.S.P.Q. (BNA) 43, 51-52 (C.C.P.A. 1963) (even close structural similarity to the prior art may be overcome by evidence that the claimed compound exhibits new and unexpected properties). Thus, chemical patents are easier to obtain, but narrower in scope.
n267 C. Taylor & Z. Silberston, supra note 185, at 271-72; D. Hounshell & J. Smith, supra note 186, at 145, 174, 206, 439, 465, 494, 545 (describing widespread licensing of various Dupont Patents).
n268 See C. Freeman, supra note 144, at 28-29; D. Landes, supra note 259, at 111.
n269 C. Freeman, supra note 144, at 28-29.
n270 J. Jewkes, D. Sawers & R. Stillerman, supra note 172, at 50.
n271 On the improvement patent of 1873, see J. Jewkes, D. Sawers & R. Stillerman, supra note 172, at 50; Solvay Process Co. v. Michigan Alkali Co., 90 F. 818 (6th Cir. 1898). On the American licensee, see D. Noble, supra note 209, at 14.
n272 Christopher Freeman has described how the pattern of rather liberal cross licensing in chemical industries led to the development of a separate industry of chemical plant construction firms:
Technological progress in established basic industrial chemicals is so rapid and so internationalised that more is usually to be gained for both the firm and the country if each national process innovation is exploited by licensing the contracting industry and selling know-how.
Freeman, Chemical Process Plant: Innovation and the World Market, 45 Nat'l Inst. Econ. Rev. 29, 50 (1968).
n273 Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 450 227 U.S.P.Q. (BNA) 293, 294 (Fed. Cir. 1985).
n274 See id. at 450-51, 227 U.S.P.Q. at 294-95.
n275 Id. at 450, 227 U.S.P.Q. at 294 (Standard Oil patent); id. at 451, 227 U.S.P.Q. at 295 (American Cyanamid patent); Dow Chem. Co. v. American Cyanamid Co., 816 F.2d 617, 617, 2 U.S.P.Q.2d (BNA) 1350, 1350 (Fed. Cir.) (Dow patent), cert. denied, 484 U.S. 849 (1987).
n276 See Standard Oil, 774 F.2d at 453, 227 U.S.P.Q. at 296.
n277 See Dow Chemical, 816 F.2d at 617, 2 U.S.P.Q.2d at 1350.
n278 None of the patents at issue in the various suits appear broad enough to serve the "prospect" function. Under the cases, for example, the Standard Oil process does not appear to infringe Dow's patents. Thus an independent route to the acrylamide-producing process is left open.
n279 The original Solvay alkali patent was of this nature; see supra notes 268-271 and accompanying text.
n280 Catalytic research led to the invention of polypropylene, for example. See infra note 294 and accompanying text.
n281 See, e.g., Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 450, 227 U.S.P.Q. 293, 294 (Fed. Cir. 1985) (listing licensees of acrylamide production process patent); id. at 451, 227 U.S.P.Q. at 295 ("[Standard Oil] offered Cyanamid a license . . . [but] Cyanamid took the position that it did not need a license . . . .").
n282 See Mueller, The Origins of the Basic Inventions Underlying DuPont's Major Product and Process Inventions, 1920 to 1950, in The Rate and Direction of Inventive Activity, supra note 143, at 326.
n283 See id. at 328.
n284 See C. Freeman, supra note 144, at 61; see also S. Hollander, supra note 178, at 52-120, 199-200 (detailed study of major and minor process improvements at various DuPont rayon plants).
n285 2 W. Reader, supra note 147, at 52-53. Du Pont researchers first synthesized nylon in the late 1930s. The company obtained a series of broad product patents, C. Taylor & Z. Silberston, supra note 185, at 342, culminating with the "Nylon 66" patent covering a commercially valuable form of the fiber. See O'Brien, Patent Protection and Competition in Polyamide and Polyester Fibre Manufacture, 12 J. Indus. Econ. 224, 225 (1964).
n286 See D. Hounshell & J. Smith, supra note 186, at 384-86.
n287 Id. at 420-22.
n288 See J. Jewkes, D. Sawers & R. Stillerman, supra note 172, at 341-42. In the early 1950s, researchers at Phillips Petroleum were working on the same problem. Id. at 342.
n289 The original patent contained limitations relating to temperature, pressure and oxygen concentration. In fact one historian of the industry suggests that the search for high-density polyethylene may have been motivated in part by a desire to skirt the Imperial patents. J. Allen, Studies in Innovation in the Steel and Chemical Industries 47 (1967) ("Many of the early would-be Ziegler licensees . . . were, however, probably seeking a route free from the I.C.I. patents, either because they wished to be free, or could not get the know-how as well as the patents."). See Standard Oil Co. v. Montedison, 494 F. Supp. 370, 374-75, 206 U.S.P.Q. (BNA) 676, 685-87, 207 U.S.P.Q. (BNA) 298 (D. Del. 1980), aff'd, 664 F.2d 356, 212 U.S.P.Q. (BNA) 327 (3d Cir. 1981), cert. denied, 456 U.S. 915 (1982).
n290 C. Freeman, supra note 144, at 67; Montedison, 494 F. Supp. at 374-75, 206 U.S.P.Q. at 685-86. Polypropylene has emerged as a substitute for polyethylene in several key applications. See Smoluk, Poyolefin Foams Take More Performance Jobs, Modern Plastics, Feb. 1988, at 98-100; Mansfield, Nonwovens Report, Textile World, May 1987, at 12.
n291 See Montedison, 494 F. Supp. at 374, 206 U.S.P.Q. at 685 (patent interference between four firms). The fifth firm apparently bowed out of the competition. See id. at 374 n.4, 206 U.S.P.Q. at 685 n.4.
n292 The interference just mentioned, for example, was declared in 1958 and resolved by the District Court only in 1980. See also United States Steel Corp. v. Phillips Petroleum Co., 865 F.2d 1247, 1248, 9 U.S.P.Q.2d (BNA) 1461, 1462 (Fed. Cir. 1989) (upholding Phillips' polypropylene product patent).
n293 Polyethylene was discovered in 1935-36 by scientists from Imperial Chemical Industries of Great Britain; Imperial held the early product patents. 2 W. Reader, supra note 147, at 351-54; id. at 357 ("In the USA, the most important market, ICI held a 'composition of matter' patent which protected polythene [i.e., polyethylene] itself, regardless of the process by which it was made."); J. Allen, supra note 289, at 24-25; J. Jewkes, D. Sawers & R. Stillerman, supra note 172, at 280. Du Pont, however, held a patent on a commercially valuable form of the polyethylene. See O'Brien, supra note 285, at 229; C. Taylor & Z. Silberston, supra note 185, at 342. As part of a general cross-licensing and market-sharing arrangement, the two companies licensed these valuable patents to one another for production in their respective home markets. See 2 W. Reader, supra note 147, at 52-53.
This arrangement was challenged by United States antitrust authorities in the late 1940s and early 1950s. Id. at 428-44. The resulting consent decree ordered Du Pont and Imperial to license all patents covered by their agreements, including those remaining on nylon and polyethylene. See United States v. Imperial Chem. Indus., 105 F. Supp. 215, 93 U.S.P.Q. (BNA) 360 (S.D.N.Y. 1952). The compulsory licensing of polyethylene was ordered id. at 223. A follow-up study in Congress concluded that
the judgment appears to have made it possible for a substantial number of companies to enter this field. There appears to be substantially more competition in the manufacture and sale of polythene products than there was before the judgment was entered.
Staff of the Subcommittee on Patents, Trademarks, and Copyrights of the Senate Comm. on the Judiciary, supra note 7, at 13 (showing the Imperial had issued nine licenses on polyethylene by 1955; Du Pont had issued 17 for polyethylene and 40 for nylon); see also The Polyethylene Gamble, Fortune, Feb. 1954, at 134, 136 (describing eight firms competing in this field under licensing agreements). It is possible that Imperial would have licensed competitors in exchange for new process research, which its competitors pursued party to gain leverage in licensing negotiations. See 2 W. Reader, supra note 147, at 357 (Imperial was fortunate to have a United States product patent "because in Union Carbide, unknown to ICI, work was going on to develop a process entirely independent of ICI's, and it succeeded."); id. at 433 (describing DuPont's strategy of pursuing process-oriented research to lower the royalty Imperial could charge on polyethylene); see also United States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1124, 212 U.S.P.Q. (BNA) 889, 891-92 (D.C. Cir. 1981) (describing Ziegler's exclusive license to make and sell catalysts to Hercules Incorporated, as well as his licensing of several others to use those catalysts in in-house production).
n294 245 F.2d 693, 113 U.S.P.Q. (BNA) 423 (4th Cir. 1957); see supra notes 53-55 and accompanying text.
n295 Id.; see also 1 D. Chisum, supra note 45, § 1.03[c] (collecting other cases on this point).
n296 See P. Grubb, Patents for Chemists 158 (1982); Marshall, Penn Charges Retin-A Inventor with Conflict, 247 Sci. 1028 (1990) (dispute between University of Pennsylvania and scientist over scientist's attempt to obtain a "new use" patent for Retin-A as a wrinkle reducer).
n297 Hand held that the purified adrenalin, although it existed in the human body, was transformed by the inventor's purification process into a useful drug and therefore constituted "for every practical purpose a new thing commercially and therapeutically." Parke-Davis & Co. v. H.K. Mulford & Co., 189 F. 95, 103 (C.C.S.D.N.Y. 1911) (L. Hand, J.), aff'd in part and rev'd in part, 196 F. 496 (2d Cir. 1912).
n298 See Scripps Clinic & Research Found. v. Genentech, Inc., 666 F. Supp. 1379, 1390, 3 U.S.P.Q.2d (BNA) 1481, 1488 (N.D. Cal. 1987), patent invalidated in Scripps Clinic & Research Found. v. Genentech, Inc., 707 F. Supp. 1547, 11 U.S.P.Q.2d (BNA) 1187 (N.D. Cal. 1989).
n299 See id.
n300 Scripps Clinic & Research Found., 707 F. Supp. at 1552, 11 U.S.P.Q.2d at 1191.
n301 See, e.g., Sit, Biotech, Amgen Remain at Odds, Boston Globe, Apr. 18, 1990, at 41, cols. 3, 3-5 (successful effort of Amgen to stay cross-licensing ordered by district court after both parties were found to infringe each other's patents on erythropoietin (EPO)).
n302 See supra note 12 and accompanying text.
n303 See supra notes 187-188 and accompanying text.
n304 See M. Kenney, supra note 188; Kenney, supra note 188. But cf. Koenig, A Bibliometric Analysis of Pharmaceutical Research, 12 Res. Pol'y 15, 35 (1983) (reviewing data on the number of industrial patents that cite basic scientific research articles in various pharmaceutical industry sectors, including biotechnology-derived pharmaceuticals, and concluding that industrial research feeds basic science in this field).
n305 At least in its earliest stages. See Nelson, The Link Between Science and Invention: The Case of the Transistor, in The Rate and Direction of Inventive Activity: Economic and Social Factors, supra note 143, at 549; Shockley, The Path to the Conception of the Junction Transistor, 23 IEEE Trans. on Electron Devices 597 (1976).
n306 Advances in Conductor Materials, N.Y. Times, Sept. 30, 1989, at 32, col. 1; Pool, Superconductor Patents: Four Groups Duke It Out, 245 Sci. 931 (1989).
n307 See Kohler & Milstein, Continuous Cultures of Fused Cells Secreting Antibody of Predefined Specificity, 256 Nature 495, 495-97 (1975).
n308 Three Immunology Investigators Win Nobel Prize in Medicine, N.Y. Times, Oct. 16, 1984, at A1, col. 4.
n309 In fact, the last sentence of the Kohler-Milstein paper itself noted these possibilities. See Kohler & Milstein, supra note 307, at 497; see also Mackenzie, Cambrosio & Keating, The Commercial Application of a Scientific Discovery: The Case of the Hybridoma Technique, 17 Res. Pol'y 155 (1988).
n310 This discussion is taken from a longer account of the case in Merges, supra note 190, at 857-58.
n311 Hybritech, Inc. v. Monoclonal Antibodies, Inc., 623 F. Supp. 1344, 1353, 227 U.S.P.Q. (BNA) 215, 221 (N.D. Cal. 1985), rev'd 802 F.2d 1367, 231 U.S.P.Q. (BNA) 81 (Fed. Cir. 1986), cert. denied, 480 U.S. 947 (1987).
n312 See Cohen, et al., Construction of Biologically Functional Bacterial Plasmids In Vitro, 70 Proc. Nat'l Acad. Sci. 3240 (1973).
n313 The prosecution and licensing of this patent are ably described in Ku, Licensing DNA Cloning Technology, 23 LES Nouvelles 112 (June 1983). On the licensing of this patent, see M. Kenney, supra note 188.
n314 See U.S. Patent No. 4,704,362, issued Nov. 3, 1987.
n315 See S. Hall, Invisible Frontiers: The Race to Synthesize a Human Gene 317 (1987).
316 Id. at 152-53.
n319 See Genentech Receives Broad Patent For Basic Gene-Splicing Techniques, Wall St. J., Nov. 4, 1987, at 8, col. 1 (quoting George B. Rathman, Chairman and Chief Executive Officer of Amgen, Inc.). There are some indiiications that Genentech is pursuing a strategy of construng the patent claims broadly, but charging a fairly low royalty so as not to create an incentive to challenge the patent. See G-tech to Push for Royalties, BioEngineering News, Nov. 12, 1987, at 1, col. 1.
n320 In re O'Farrell, 853 F.2d 894, 7 U.S.P.Q.2d (BNA) 1673 (Fed. Cir. 1988).
n321 Id. at 899-901, 7 U.S.P.Q.2d at 1677-78. The frog protein was not truly nonoperational; it formed part of the structure of ribosomes, the cell components where proteins are made. This relatively rare type of ribosomal protein is to be contrasted with the much more common proteins coded for in a cell's DNA -- everything from hormones to collagen to antibodies. See id. at 897-98, 7 U.S.).Q.2d at 1676.
n322 Id. at 895, 7 U.S.P.Q.2d at 1674.
n323 See Pool, supra not 306 (organizations fighting over superconductivity patents).
n324 F. Scherer, in his study of the Watt-Boulton enterprise, concluded that "Boulton & Watt's refusal to issue licenses allowing other engine makers to employ the separate-condenser principle clearly retarded the development and introduction of improvements." F. Scherer, supra note 164, at 25. There is much on this point in R. Brenner, supra note 140, at 110-15 (describing resistance to innovations in business and science); id. at 103-04 (many major innovations made by "outside" people and firms).
n 325 The Hughes Satellite case was an occasion when equivalents might have been applied in this way, see supra notes 78-80 and accompanying text. Reverse equivalents might have been used in a similar fashion in the polypropylene case, see supra notes 288-293 and accompanying text.
n326 . Texas Instruments, Inc. v. United States Int'l Trade Comm'n, 805 F.2d 1558, 231 U.S.P.Q. (BNA) 833 (Fed. Cir. 1986); see supra notes 83-93 and accompanying text.
n327 See Texas Instruments, Inc. v. United States Int'l Trade Comm'n, 805 F.2d 1558, 1570, 231 U.S.P.Q.2d (BNA) 833, 841 (Fed. Cir. 1986) ("Taken together these accumulated differences [between the invention described in the patent and the accused devices] distinguish the accused calculators from that contemplated in the [Texas Instruments] patent and transcend a fair range of equivalents of [this] invention"), and the opinion of the Federal Circuit denying plaintiff's motion for rehearing, 846 F.2d 1369, 1370-71, 6 U.S.P.Q.2d (BNA) 1886, 1888 (Fed.Cir. 1988) ("[T]hough all of the functions of the claimed elements were performed, none was performed by the structures described in [Texas Instruments' patent] specification or by equivalents of those structures."). The late Judge Davis made this point in his concurrence to the opinion denying plaintiff's motion for rehearing. 846 F.2d at 1372, 6 U.S.P.Q.2d at 1889 (Davis, J., concurring).
n328 We do not mean to suggest that the accused device should be found noninfringing if it is nonobvious with respect to the patentee's invention. We recognize that a device can be both patentable and an infringement of an earlier patent -- that there can be blocking patents. See Atlas Powder Co. v. E.I. Du Pont de Nemours & Co., 750 F.2d 1569, 1580-81, 224 U.S.P.Q. (BNA) 409, 416-17 (Fed. Cir. 1984). What we mean to suggest is that at some point the accused device ought to be considered, and its merits ought to be a factor of importance in the equivalents determination. The Graver Tank formulation of the doctrine supports this. See Graver Tank & Mfg. Co. v. Linde Air Prods. co., 339 U.S. 605, 610, 85 U.S.P.Q. (BNA) 328, 331 (1950) (only "insubstantial" changes are encompassed by the doctrine of equivalents). A recent article points out that this aspect of Graver Tank has been ignored. See Adelman & Francione, supra note 75, at 709-10.
n329 Note that this is precisely the type of analysis used by the Court in the original reverse equivalents case involving the Westinghouse air brake. See supra notes 71-90 and accompanying text.
n330 See supra notes 73-78, 87 and accompanying text.
n331 See supra notes 115-120 and accompanying text.
n332 See Phillips Petroleum Co. v. United States Steel Corp., 673 F. Supp. 1278, 1286, 1292, 6 U.S.P.Q.2d (BNA) 1065, 1069, 1074 (D.Del. 1987), aff'd, 865 F.2d 1247, 1253 n.9, 9 U.S.P.Q.2d (BNA) 1461, 1466 n.9 (Fed. Cir. 1989); see also In re Hogan, 559 F.2d 595, 607, 194 U.S.P.Q. (BNA) 527, 538 (C.C.P.A. 1967) (stressing need for reverse equivalents because of this rule).
n333 See supra notes 78-80 and accompanying text.
n334 See supra note 326.
n335 See supra note 262 and accompanying text.
n336 See United States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1124, 212 U.S.P.Q. (BNA) 889, 891-92 (D.C. Cir. 1981).
n337 See United States v. Imperial Chem. Indus., Ltd., 105 F. Supp. 215, 223, 93 U.S.P.Q. (BNA) 360, 365 (S.D.N.Y. 1952) (ordering compulsory licensing of polyethylene).
n338 Imperial Chemical Industries, Ltd., for example, held a major product patent on polyethylene. Union Carbide had been licensed to make the product during World War II. Although an antitrust action forced imperial to continue the license, Union Carbide had developed a significant new process, which might well have induced Imperial to continue to license in exchange for the new process. See supra note 293.
n339 See supra notes 146-148 and accompany text.
n340 See supra notes 288-296 and accompanying text.
n341 In re Thauau, 135 F.2d 344, 347, 57 U.S.P.Q. (BNA) 324, 326 (1943).
n342 See 35 U.S.C. § 271(c) (1988).
n343 See 135 F.2d at 347, 57 U.S.P.Q. at 326.
n344 See, e.g., Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1103-04, 174 U.S.P.Q. (BNA) 65, 70-71 (5th Cir. 1972) (patent for Darvon upheld despite close similarity to prior art structures).
n345 See Hoxie, A Patent Attorney's View, in Seminar on Chemical Invention, 47 J. Pat Off. Soc'y 630, 638 (1965) ("This . . . has led to inequitable results in that of two discoveries of equal value and 'inventiveness,' one may be patented and the other not depending on whether or not the 'gimmick' novelty [i.e., minor structural variation] can be supplied.").
n346 Monsanto Co. v. Rohm & Haas Co., 312 F. Supp. 778, 790-91, 164 U.S.P.Q. (BNA) 556, 566, 165 U.S.P.Q. (BNA) 683 (E.D. Pa. 1970) (Supp. op.), aff'd, 456 F.2d 592, 172 U.S.P.Q. (BNA) 323 (3d Cir.), cert. denied, 407 U.S. 934, 174 U.S.P.Q. (BNA) 129 (1972); see also Comment, Uses, New Uses and Chemical Patents -- A Proposal, 1968 Wis. L. Rev. 901, 915 (proposing abolition of product patents on compounds in favor of patents on methods of production and methods of using -- two species of process patents).
n347 Enforcement may be somewhat more tractable in light of recent legislatioin making it legal to tie an unpatented product (e.g., the fungicide in Rohm and Haas] to the sale of a patented item (e.g., the right to practice the process patent), so long as the patentee does not have market power in the market for the tying (patented) item. See Patent and Trademark Authorization Act, Pub. L. No. 100-703, § 201, 102 Stat. 4676 (1988) (codified at 35 U.S.C. § 271(d)(4) & (5)); see also Merges, Reflections on Current Legislation Affecting Patent Misuse, 70 J. Pat. & Trademark Off. Soc'y 793, 799-801 (1988). This legislation built on an earlier Supreme Court case holding that it is infringement to make, use or sell a product which can only be used in a patented process, in effect extending the coverage of the process patent to include the unpatented product as well. Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 201, 206 U.S.P.Q. (BNA) 385, 398 (1980). See Oddi, Contributory Infringement/Patent Misuse: Metaphysics and Metamorphosis, 44 U.Pitt.L.Rev. 73 (1982) (describing implications of this case); see also Kaplow, Extension of Monopoloy Power Through Leverage, 85 Colum. L. Rev. 515, 525-32 (1985) (elucidating possibility of anticompetive effects from tie-ins).
n348 See Scripps Clinic & Research Found. v. Genentech, Inc., 666 F. Supp. 1379, 3 U.S.P.Q.2d (BNA) 1481, (N.D. Cal. 1987), patent invalidated, Scripps Clinic & Research Found. v. Genentech, Inc., 707 F. Supp. 1547, 11 U.S.P.Q.2d (BNA) 1187, (N.D. Cal. 1989); supra notes 298-301.
n349 189 F. 95 (C.C.S.D.N.Y. 1911) (L. Hand, J.), aff'd in part and rev'd in part, 196 F. 496 (2d Cir. 1912).
n350 Genentech, Inc.'s Patent,  R.P.C. 553, 596, aff'd,  R.P.C. 613 (Ct. App.):
Had Genentech, as workers in this field may do, developed some totally new product, they would have been entitled to a monopoly on the product, whatever its process of production. Had they produced some new and valuable variant of t-PA, they might have got [sic] protection on that. What they did by way of invention, however, was to discover a particular route to a known end, and to grant them a monopoly which would stop others from attempting to discover alternative, possibly wholly unknown and possibly better routes to that end, would be to stifle research which, in the public interest, it ought to be open to other investigators to pursue and over which other investigators in their turn, if they make valuable contributions, might be able to secure proper protection.
See also Mellor, supra note 51 (describing British t-PA litigation). Recently proposed legislation in the U.S. would achieve much the same result; for an analysis, see Merges, Claiming Genes and Sequences (Background Paper for Sloan Foundation Symposium on Intellectual Property Rights in the Biotechnology Industry, Nov. 2, 1989, on file with the Columbia Law Review).
n351 See supra notes 101-114 and accompanying text.
n352 See supra notes 132-124 and accompanying text.
n353 Some might argue just the opposite -- that patent doctrine is irrelevant because economists have come to understand that patents are regarded as essential by firms in only a few industries. See C. Taylro & Z. Silberston, supra note 194, at 334-40, 346-47; Mansfield, Patents and Innovation: An Empirical Study, 32 Mgmt. Sci. 173, 176 (1986) (patents found not essential to protecting innovations in many industries). In this connection, the most recent and complete study of the means for capturing returns from research shows that in most industries advantages associated with a head start, including establishment of production and distribution facilities, and moving rapidly down a learning curve, were judged significantly more effective than patents in enabling a firm to reap returns from innovation. See Levin, Klevorick, Nelson & Winter, Appropriating the Returns from Industrial Research and Development, 1987 Brookings Papers on Econ. Activity 783 (1987) (reporting results of extensive empirical survey of research and development personnel at U.S. corporations). Nevertheless, firms do continue to file for, prosecute, obtain, and litigate patents. The rules surrounding them must therefore be of a least some importance, because patents themselves continue to be.