An Organizational Approach to the Design of Patent Law

6 VERTINSKY FINAL_JAD (DO NOT DELETE) 2/27/2012 2:20 PM
278 MINN. J. L. SCI. & TECH. [Vol. 13:1
This Article has made the case for a reorientation of patent
policy to focus on the mechanisms through which patents alter
the nature and cost of transactions supporting systems of innovation.
The organizational approach that I have proposed promotes
the design of patent laws that are more narrowly tailored
to the particular needs of alternative innovation
processes, focused on reducing the propensity for behaviors
which are most costly to the organization of economic activities,
robust to constraints on rule design and implementation, and
sensitive to alternative mechanisms for regulating behavior. By
adopting such an approach, policymakers can produce more effective
strategies for patent policy design in real world settings
characterized by bounded rationality, market imperfections,
and constraints on efficient rule change. Existing applications
of New Institutional Economics to patent law have offered important
insights into how patents impact the organization of
economic activities. But such efforts have thus far remained on
the sidelines in policy discussions, operating largely in isolation
from other theories and at a level that is either too abstract or
too descriptive to map readily into practical policy prescriptions
Recognizing that some level of abstraction from reality is essential
in policy design, the organizational approach provides a
way of capturing critical features of real world innovation processes
without losing analytical rigor and empirical testability.
It offers an opportunity for integrating existing patent theories
and empirical work in a way that can test the theories’ robustness
and give them greater explanatory power, and it offers
new avenues for exploring different functions of patents that
may have been neglected or overlooked by mainstream approaches.
Most importantly, it provides a way of demonstrating
the relevance of patents to key objectives of modern national
innovation strategies.
Significant challenges remain in this form of analysis.
Questions arise, for example, about how to apply an analysis of
transaction costs to dynamic systems of innovation in a way
that can be both modeled and measured, and about how to
identify the types of transactions and modes of organization
that will be most favorable to evolving systems of innovation.
Given the dynamic nature of innovation, institutions must constantly
adjust if they are to keep pace in a rapidly changing society,
but the ways of making institutions such as the patent