There are two common questions that arise when you think about patents: can you monopolize something by using the patent code? And can it really help you? The first question is fairly straightforward. After all, the goal is to protect your idea, not to create a monopoly. However, the second question may be trickier. In this case, the answer will depend on how useful the idea is. If it’s a valuable one, you should look into getting it patented.
- Does it result to monopoly?
- Effects of monopoly
- relationship between patents and monopolies
Does it result to monopoly?
Antitrust case-law and literature sometimes equate patents with monopolies. However, Article 102 TFEU allows dominant patent holders to implement strategies that do not violate antitrust rules. While patents are not monopolies, they offer a market opportunity to the patentee. The patent system is not the same as a monopoly, at least not in an economic sense.
This policy is rooted in the founding principles of the United States. Ben Franklin, for example, refused to patent his inventions, and Thomas Jefferson agreed. While many modern citizens may be disapproving of patent monopolies, the founders viewed monopolies as necessary for encouraging innovation. While patent monopolies are an embarrassment and a necessity for the nation, the founders recognized their benefits.
Effects of monopoly
The most common reason for monopolies is because they limit competition. Monopolies tend to be more expensive than their competitors, and less people can afford them. This is what economists call deadweight loss associated with monopolies. This isn’t transfer, but rather a net loss to society. The more companies have monopoly prices, the more expensive they are for consumers. This is why it is important to balance the costs and benefits of patents and copyrights.
Barriers to entry also contribute to the emergence of a monopoly. Despite their lower competitive level, legal monopolies benefit from economies of scale and other factors that discourage potential competitors from entering the market. These barriers range from simple to highly restrictive. In the long run, the surviving firm will earn a normal profit. But this is only one example of how barriers to entry can increase.
While decades of case-law have discussed whether or not a patent creates a monopoly, European courts have been less prone to categorise patents as monopolies. The majority of the patent literature revolves around US case-law. The following discussion provides some context for the debate about the patent=monopoly theorem. The question of whether patents are monopolies is more complicated than it looks.
In the nineteenth century, when the United States was a hotbed of innovation, financiers began exploiting patents to control entire industries. JP Morgan used patents to engineer the takeover of the electrical industry. The tension between market monopoly and patent law increased as governments sought to control key industries. The United States has since adopted a formula that protects the inventor and encourages competition.
relationship between patents and monopolies
However, the economics behind this argument disagree. While many argue that patents create monopolies, some economists have even advocated their abolishment. They cite Disney, the pharmaceutical industry, and Disney as examples of concentrated interests. Moreover, the pharmaceutical industry has made millions from using public-domain stories without paying the copyrights. This situation is outrageous and a general problem. A better question would be, “What is the optimal length of patents?“
While the patenting code is useful for non-essential products and processes, it is ineffective in protecting life-saving drugs and treatments. Because of the high price of such medicines, the patent holders often seek ways to extend their patent protection beyond the statutory period. The patenting of incremental improvements, additions, or complementary items extends the monopoly. As such, patenting can effectively block competitors from entering the market. Further, the law has potential to address abusive patent strategies such as ‘pay-to-delay’ agreements.
The tension between antitrust law and patent law is at the root of this relationship. Antitrust is intended to protect consumers from unfair competition, while patent law is designed to grant monopolies. The American system grappled with this conflict for most of the 20th century. In the 1960s, New Deal policies improved the balancing act by limiting the patent rights of large corporations, forcing many to license technologies for free.
Competition law recognizes patent holders’ dominance as lawful, but the courts have not defined the term. This distinction makes patent holders more likely to be subject to antitrust laws when refusing to license their patented technology. However, the courts will not rule that patent holders violate the antitrust laws simply by refusing to license their patents. In such cases, patents will be more closely scrutinized, as more companies come into the market.
The patenting system is inherently unfair to the biomedical sector, which is why it is often the subject of intense lobbying. Pharmaceutical companies are notorious for their anti-patent lobbying efforts. The proposed law will likely face a significant obstacle in implementing it. However, it is a good start to ensure that the patent system is effective. It should be noted that pharma companies and their lobbying groups will continue to oppose the new law.