Are we on our way in the new economy with optimal inventive steps?

As the economy is shifting weight from physical to intellectual capital domi- nance, accompanied by the emergence of the pro-IP era, it is natural to try to reassess the traditional challenges, trade-offs and operating standards of the IP system. There is no change in the fundamental nature of information and tech- nology with its associated legal and economic difficulties in arranging for property rights, investment and trade, but the proportions of various difficul- ties increase with the increasing role of information in the economy. This chapter addresses the causes and consequences of the anti-commons problem with fragmentation of interdependent IPRs in complex technologies and the associated problems for IP assembly and technology trade. In particular the chapter analyses patentability criteria and the possibilities to use the inventive step or non-obviousness standard as one out of several policy remedies. Rais- ing the minimum inventive step standard will reduce transaction costs, invent- around costs and hold-up problems in commercializing innovations, but will also reduce incentives to innovate under certain conditions. While an optimal inventive step standard exists in principle, and uniquely so in certain cases, its empirical determination is obviously a non-obvious matter. However, a low inventive step standard may be instrumental for incumbent “evergreening”, i.e. prolonging effective patent protection, and bridging technology transitions. The patent system could finally be studied as a decentralized taxation scheme in a governance context, taking total governance costs into account.

Keywords: Patents, IPR, anti-commons, IP assembly, inventive step, transaction cost, technology markets

Published in Granstrand, O. (ed.): Economics, Law and Intellectual Property, Kluwer, 2003, Ch. 10, pp. 223-258.