Conclusions

Abstract

The patent system is based on one-patent-per-product presumption and makes little distinction between copying and improving on upon a patent. As a consequence, when evaluated in the light of dynamic incentive theory, the patent system features imbalances that may hinder follow-on innovation. The fragmentation of the modern patent landscape heightens the likelihood of follow-on innovation becoming subject to market failures such as excessive transaction costs of licensing and hold-up problems. One of the proposed approaches to resolve these market failures are open innovation models. There is a range of mechanisms to create involuntary access to patents with private ordering, such as patent pledges, but the incentives to employ them do not suffice to resolve the market failures hindering follow-on innovation. However, also compulsory liability rules in patent law and competition law fail to address the overprotection problems concerning follow-on innovation. As a solution, the author proposes a combination of three instruments: a government-initiated clearing house for patents, a “reverse license of right” to record follow-on innovator’s a commitment to license patents that they failed to clear, and a compulsory license against the suppression of open innovation.