An Organizational Approach to the Design of Patent Law

6 VERTINSKY FINAL_JAD (DO NOT DELETE) 2/27/2012 2:20 PM
266 MINN. J. L. SCI. & TECH. [Vol. 13:1
an analysis of the transactional structures of patent owners
and patent users and the transaction costs of asserting patents
against producers of existing goods. Level three and four of the
framework encompass many of the tools for unpacking this
type of strategic behavior and its implications for organizational
and market structure. Patent trolling is often used to describe
the opportunistic enforcement of patents against infringers—generally
with no intention to manufacture or market the
patented invention—with the hope of extracting licensing fees
that exceed the contribution of the invention to the user. Concerns
about patent trolls have fueled some of the most significant
proposed changes to the patent statute and have elicited
strong reactions from the courts. 236 Rather than viewing such
behavior as abhorrent, the organizational approach suggests
that such behavior is to be expected and may even serve the
function of enabling secondary markets and increasing asset
liquidity. 237 Attention then focuses on if, when, and how such
behavior impacts transaction costs and transactional structures
in the areas where opportunities for trolling arise, and how to
reduce those costs through rule change. The organizational approach
supports measures that increase the visibility and
transparency of patent rights, reducing the asymmetries in information
that patent “trolls” capitalize on. Similarly, the organizational
approach supports proposals to include considerations
of “contribution” of a patent to a product seeking to
address the patent hold-up problem. Although concerns do
arise over whether these “contributions” can be measured in an
accurate, or at least predictable, way. More careful analysis of
the use of injunctions in cases of patent infringement is also an
appropriate response, although the absence of a general consideration
for market-wide effects of an injunction limit its effectiveness,
making it a blunt instrument. As Robert Merges argues,
use of injunctions can provide the type of institutional
adjustment that is needed to adapt patent rights to shifting
236. See Robert P. Merges, The Trouble with Trolls: Innovation, Rent-
Seeking and Patent Law Reform, 24 BERKELEY TECH. L.J. 1583, 1585–87
(2009).
237. See, e.g., id. at 1584–86 (examining how property rights systems can
lose traction with the underlying economic situations they govern and examining
the challenges of rent seeking and the pressures it can put on innovation
and advocating institutional adjustments such as the eBay revision of standards
for injunctive relief).