Putting Innovation Incentives Back in the Patent-Antitrust Interface

Cheng, Thomas | April 17, 2013

This Article proposes a new approach, the constrained maximization approach, to the patent-antitrust interface. It advocates a return to the utilitarian premise of the patent system, which posits that innovation incentives are preserved so long as the costs of innovation are recovered. While this premise is widely accepted, it is seldom applied by the courts in patent-antitrust cases. The result is that courts and commentators have been overly deferential to dynamic efficiency arguments in defense of patent exploitation practices, and have failed to scrutinize the extent to which patentee reward is genuinely essential to generating innovation incentives. Under the constrained maximization approach, the antitrust courts attempt to maximize the net social benefits of an innovation by adjusting the scope of patent exploitation, subject to the constraint that innovation costs are recouped. This approach will allow the courts to take into account two important considerations in the balance between static and dynamic efficiencies that have been largely overlooked: the contribution of cumulative innovation to social welfare and the variety of ways in which innovators recover their R&D investments in addition to patent protection. Incorporation of both of these considerations lends support to a more robust approach to the patent-antitrust interface.