Chapter 3: Ignoring patents
More than 2.5 million United States patents have been issued in the last 20 years. While these patents are spread across all industries, a large percentage is concentrated in the information technology (IT) industries and others in biotechnology. The prevalence of patents in these industries has caused a number of people to worry about an “anticommons” in patent law, in which companies that want to make a product find it impossible to acquire all the rights they need from many different owners. This is a particular problem for semiconductor, telecommunications, and software companies, which must aggregate hundreds or thousands of different components to make an integrated product. Each of those components may be patented, some by many different people. The threat that any one of those patent owners can obtain an injunction shutting down the entire integrated product allows them to extort settlements well in excess of the value of their patent. The patent damages rules similarly permit excessive recoveries, such as the recent $1.5 billion jury verdict against Microsoft for infringing one of many patents covering just one of many features of an add-on to the Microsoft Windows product. Patent law permits these product manufacturers to be found to be “willful” infringers liable for treble damages and attorneys’ fees, even if they were unaware of the patent or even the patent owner at the time they began selling the product. And even if the manufacturer can avoid any of these risks by invalidating or proving non-infringement of each of these patents, doing so would cost millions of dollars per case in legal fees. Given these problems, it’s a wonder companies make products in patent-intensive industries at all.
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