The Evolving IP Marketplace: Aligning Patent Notice and Remedies ...

5and 2009 explored two: (1) notice, meaning how well a patent informs the public of whattechnology is protected; and (2) remedies, meaning damages and injunctions following a findingof patent infringement. Understanding how patent notice and remedies affect innovation andcompetition requires that we first examine how the pathways of innovation and the role ofpatents have evolved. That is the goal of this chapter.In one important aspect of that evolution, many firms are increasingly embracing “openinnovation.” In a traditional or closed model of innovation, a firm relies on its own R&D tocreate the products it markets. But a firm that pursues an open innovation strategy recognizesthat valuable ideas can originate with others and seeks to acquire those inventions that fit itsbusiness model. Many of the inventions acquired and commercialized by large firms originatewith start-ups and small companies, which account for a steadily increasing percentage of R&Dspending.Consumers benefit from open innovation strategies. Technology transfer permits adivision of labor between those who invent and those who manufacture most efficiently. Thiscan speed up the rate of innovation and result in broader, faster distribution of new products toconsumers. By providing a pathway for invention without commercialization, technologytransfer also lowers barriers to entry for inventors who do not have access to the capital required6to build manufacturing facilities and establish distribution channels. Easier entry supportsadditional sources of invention, which increases competition among technologies to be furtherdeveloped or incorporated into products. That competition benefits consumers by resulting inbetter, cheaper products. Moreover, competition among technologies for development funding isan important mechanism for allocating scarce resources to those inventions having the greatestchance of generating the products most valued by consumers.The patent system facilitates open innovation and technology transfer in ways thatimplicate patent remedies and the notice function. The exclusive patent right creates incentivesfor sellers of technology to invent and buyers of technology to make the purchase and invest infurther development. But the nature of the exclusive right depends in part on the remediesavailable for its infringement. Patents also define rights based on intangible ideas, which helpscreate a market for technology and makes contracting easier. But a patent’s success in doing sodepends upon how well it provides notice of what technology it protects. Chapters 3-8 of thisreport draw on the insights and information of this chapter in analyzing the law of patent noticeand remedies and making recommendations to improve them.5Transcripts and agendas for the hearings and written submissions are available athttp://www.ftc.gov/bc/workshops/ipmarketplace/. Appendices C, D and E provide lists of hearingsparticipants, agendas and written submissions.6ASHISH ARORA, ANDREA FOSFURI & ALFONSO GAMBARDELLA, MARKETS FOR TECHNOLOGY:THE ECONOMICS OF INNOVATION AND CORPORATE STRATEGY 12-13 (2001).33