High tech companies—especially in the emerging areas of the Internet of Things, wearable devices, and personalized medicine—have found it difficult to enforce their patents on interactive technologies. Enforcement is especially difficult when multiple parties combine to perform all of the steps of a claimed method, which is referred to as joint or divided infringement. Because of this difficulty, some commentators advocate that “interactive” patents susceptible to divided infringement should not be enforced at all.
In contrast, this Article argues that economic theory supports the enforcement of interactive patents. Previous papers have analyzeddivided infringement problems from a doctrinal and policy perspective.This Article is the first to analyze divided infringement from an economic perspective using economic theories of the patent system.
Uniquely, all three prevalent economic theories of the patent system—(1) reward theory, (2) prospect theory, and (3) rent-dissipation theory—support the enforcement of interactive patents. Reward theory isconsistent with enforcing the rights of interactive patents so long as thepatent system balances the social cost with the social benefit ofinteractive technologies. Prospect theory recommends enforcinginteractive patents where it would promote an inventor’s ability tocommercialize her invention free from direct competition. Finally, rent-dissipation theory suggests enforcing interactive patents if enforcement will effectively reduce the dissipation of patent rents.
Viewing interactive patent enforcement through the lens of these economic theories reveals how doctrinal tests for divided infringement may align with the economic goals of the patent system. Although the doctrinal test for divided infringement will likely continue to evolve, start-ups and disruptive, hi-tech companies that own interactive patentsshould find some comfort in the notion that the economic underpinningsof the patent system support enforcement of their interactive inventions.