An Organizational Approach to the Design of Patent Law

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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
6 VERTINSKY FINAL_JAD (DO NOT DELETE) 2/27/2012 2:20 PM 2012] AN ORGANIZATIONAL APPROACH 279 system adaptively efficient remain the subject of continuing inquiry. 281 Clearly the challenges facing effective patent policy design are significant, and the value of the organizational approach that I propose remains to be proven by the effectiveness of future concrete applications. I conclude, however, that the organizational approach seems to be the most promising platform on which to pursue this challenging regulatory agenda. Moreover, without such a shift in approach, critical opportunities to turn patents into effective tools of innovation will be missed. 281. See North, supra note 60, at part VII (“It is adaptive rather than allocative efficiency which is the key to long run growth.”).
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An Organizational Approach to the Design of Patent Law

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