Working Papers,
University of Aarhus, Aarhus School of Business, Department of Management

Abstract: This article examines the evidence behind claims that innovation is

hindered or blocked (termed technology suppression) by

corporations’ use of patents. In other words, are there ways in

which the exploitation of the exclusive development right of the

patent can be shown to retard the process of innovation, other than

in the trivial sense of excluding third parties from the right to

develop the technology covered by the patent? There are many

references to this possibility in the management, economic and

legal literatures, but two papers stand out for grounding their claims

of corporate suppression of innovation in the historical record

(Dunford 1987; Merges and Nelson 1990). Historical writing is the appropriate form of evidence bearing on how companies have made

use of their patents, but this paper shows that in Dunford and

Merges and Nelson’s writing the historical evidence has been

misinterpreted as providing evidence of technology suppression.

What it really reveals are a variety of practical problems in the

administration of the patents system as a system of development

prospects.

In the first sections of this paper the ground is prepared by a brief

review of the nature of property rights and the changing view of the

function of the patent system in the literature. This argues that the

development prospect function of patents must be considered a

feature of significant patent development. Then follows a detailed

reexamination of the claims for technology suppression in the

commonly cited historical cases. These are organised to cover the

major ‘development scenarios’ involving: ‘pioneer’, or platform

technology patents; multiple, necessary, but independently held

patents (eg. radio); the hundreds of minor patents in the so-called

‘patent thicket’.2

The empirical reanalysis confirms that most claims of deliberate

corporate technology suppression are the product of a misinterpretation

of the evidence. The interpretation that patents have

been used to retard technology development is found to have been

promoted by a number of features of the literature;

1) the widespread belief, especially amongst economic analysts,

that a patent is a form of economic monopoly

2) basic features of property law most pertinent to the function of

patents have been forgotten within the contemporary legal

literature

3) some of the historical accounts themselves are confused in their

use of the term ‘competition’ and in their understanding of

patents as property

4) the longstanding, hostile US anti-trust treatment of patents, itself

a product of the assumption that patents are conducive to the

formation of economic monopoly. Merges and Nelson argue that the cases of radio, the Selden

patent, Edison’s carbon filament patent and the Wright brothers’

warped wing patent illustrate the general problem that awarded

patent scope tends to be excessively broad. In contradiction to their

position, it is shown here that these cases illustrate a range of

idiosyncratic problems in the administration of the patent system

that generated unusually severe conflicts between awarded scope

and technology development. The general problem is not an

excessive award of ‘broad scope’, but the ability of Patent Offices

and courts to maintain the patent institution as an effective system

of development prospects. In particular problem cases, one must

consider the reasons why the patent failed to act as a proper

development prospect and devise a tailored policy solution with the

object of retaining the development prospect function as much as

possible.

This revision therefore reinforces an understanding of the patent

system as a system of property rights that in principle, and usually

in practice, is an effective social device to aid the exploration and

exploitation of novel technical ideas (inventions).

Keywords: No keywords

60 pages, November 1, 2005

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