LEGAL ANALYSIS OF THE PATENT RIGHTS REGIME AS INSTRUMENT FOR PROMOTING INNOVATION INSTRUMENT FOR PROMOTING INNOVATION

A. Introduction

The patent system is the base of any system of technology transfer. It addresses the problem of the inventor obtaining a reasonable participation in the benefits society receives from his invention. The establishment of a patent system is one of the basic conditions for the commercialization of technology. Nevertheless this institution presents many contradictions. This institution has not succeeded in defining proper instruments which harmonize the interests of technology innovators, users and society, as ordered by Article 7 of the TRIPS Agreement.

The international negotiation of Intellectual Property Rights at GATT is a clear example of this problem. The definition of a protection in terms of private property or monopoly rights appeared to be the only solution to the appropriability problem of inventors, a solution that was not satisfactory to all parties. However, parties were compelled to accept it because better alternative were not available. The final version of the TRIPS Agreements presents an interesting compromise, which can summarized as follows: “monopoly or private property rights should be granted to inventors, but they should not be used to create monopolies”. In the end it states that an institutional solution for the conflict between promotion and diffusion of technology should be found, but it does not define it expressly.

This chapter analyzes the patent system as a legal institution. The first part analyzes the evolution of patent rights in order to find the causes that motivated the use of the private property and monopoly institutions to protect inventors. It explains why property rights are generally presented as the only possible solution to protect technology, or at least as the best possible institute to promote technology creation and diffusion. The second part of this chapter makes a legal dogmatic analysis of this institution and its variants in order to determine if intellectual property actually corresponds to the best of the legal tradition of the Western countries. A legal framework that harmonizes all the interests involved will be proposed in the fourth chapter.

There are reasons that explain why the patent system was originally defined as a monopoly granted as a privilege to the patentee. Patents emerged in a time when

monopoly privileges and censorship were the norm to order society³⁶³. Furthermore, at that time markets were incipient and there was almost no cooperation links among manufacturers. Because of the lack of opportunities to obtain profit by commercializing technology, inventors had no better option than keeping their technology secret and exploiting it under monopoly basis. The idea of massive selling in a huge market, which motivates enterprises to cooperate to expand their production potential was not to be implemented until a few decades ago. Monopolies were the best alternative available to exploit inventions. This is why the patent institution emerged and developed as a system of privileges or monopolies.

Patent rights achieved their most elaborate form through their definition as property rights. The figure of property allowed patent rights a more a coherent legal framework which also avoided the term “monopoly”. This was politically convenient, because monopolies were negatively valued by the French Revolution, which contested the monarchy and the privilege systems that sustained it. As a result, patent rights were considered property rights, thus absolute fundamental rights and the social interests that originated the system were displaced to occupy an indirect and secondary role.

The contradiction between the promotion of technology creation and the diffusion of technology appeared in the traditional western patent system to be ineluctable.

This chapter analyzes the legal framework for patents. This framework appears to be a complicated collection of very formalistic and arbitrary rules intended to reconcile opposite interests. The most important doctrines about the legal nature of patents are considered. The intention of the chapter is to demonstrate that a general and solid theoretical elaboration that could define general principles of law have been missing.

Globalization of markets and the recent TRIPS Agreement create the need to defined legal institutions that could be applied in all legal systems. These legal institutions should be based on solid general principles of law in order to consolidate a stable global framework. This chapter discusses the basic legal instruments necessary to define a suitable framework for patents.

363 See Palmer, Intellectual Property: A Non-Posnerian Law and Economics Approach, 12 Hamline L.

Rev. 261, 268 (1988).

Chapter four explores the economic reasons for a reconsideration of the system.

The importance of the “global competitiveness” of an economy also stresses the need to diffuse the use of technologies at the national level. On the other hand, the globalization of the economy and the increasing interdependence between enterprises have increased the need to control the abuse of market power and the creation of monopolies. Furthermore, the globalization of the economy has increased the opportunities to exploit technologies in other ways than creating monopolies. In order to penetrate other markets and optimize the global exploitation of a specific patent, many enterprises are influenced to find ways to establish permanent cooperation links with other enterprises.

The change of the economic panorama is reinforced by the growth of electronic traffic on digital research networks. The creation of technology is shifting from individual work towards cooperative research organization. The routine exploitation of existing technologies constitutes a very important source to give economic value of technologies through improvement and discovery of new applications. Particularly in the field of new technologies, the adding small elements of novelty or novel arrangements of new elements of design can create revolutionary changes. These changes produce very important increases in the economic value of these technologies.

All these factors forecast a crisis of the traditional view of the intellectual property regime³⁶⁴. The current regime is based on the protection of absolute novelty. It tends to conceive the exclusion right of patents more as an absolute or unconditional right to exclude others from the use of patented technology than as an instrument for allowing the patentee to participate in the economic value of its invention and coordinate the social exploitation of it. The traditional conception hinders the definition of a system of incentive schemes necessary to define a framework that facilitates the collaboration between creators of new technologies and their users and developers. As a result, there are reasons to reexamine the patent system in order to make it more flexible and efficient. Therefore, this chapter is not only an analysis of how the patent institution works. It attempts to find the causes that moved this system to the contradictions of the proprietary protection of innovation. Its main goal is to settle a base which allows for the

364 Foray, Kowledge Distribution, at 77-115.

redefinition of patent rights in order solve the conflict between protection and diffusion of technology.

Patent Rights have originally been designed to serve a very specific economic goal, the promotion of the industrial development of a country. In order to achieve this goal, three main activities should be promoted simultaneously: the creation of new technologies, the disclosure of these technologies to the public (public access) and the effective use of the technology to provide the society with better production resources. This functions are very close interrelated. The future development of technology depends on the availability of the information of the actual technology and on the future opportunities to profit from investments in the development of that technology³⁶⁵.

The definition of a patent system should contemplate these three functions. These three functions may be in harmony or in contradiction to each other, depending on the economic and institutional conditions which are integrated into a patent system. The principal contradiction is the interest of the innovator in obtaining maximal profit for their invention, which influence him to use its right to exclude others from the use of his technology in order to create a monopoly. This interest is in conflict with the public interest that is precisely behind the protection system for innovators: that inventions spread in society, so that the general welfare increases and new applications and improvements of that technology could be generated by other users.

After analyzing the legal aspects of the patent institution, possibilities of a reform are explored. Special attention will be given to the “soft protection patent system”

of Japan. This system will be analyzed in order to evaluate the importance of alternative institutions in the definition of an effective patent system. Our final goal is to investigate the evolution of the patent system and to analyze the suitability of this instrument for the promotion of technology development.

365 The introductory part of chapter four refers to the economic analysis of these aspects.

B. Origins of the Modern Patent System: From a Monopoly Privilege to