IP and Innovation Law
The question of how contracts promote innovation has long attracted scholars’ attention. This Article tackles this question by studying one contractual mechanism — bundling arrangements — that innovators frequently use to transfer other assets along with a patent license. It examines 400 patent licensing transactions that public companies filed with the Securities and Exchange Commission, and finds that 42.25% of them included bundling arrangements. In general, these arrangements enhance innovation, as the assets in the bundle can help the licensee deploy the licensed technology. It also finds that ex ante patent licensing transactions involved bundled asset transfers more frequently than ex post transactions did. The findings have two important implications for law and policy. First, the efficiencyenhancing effect of these arrangements should serve as a justification for their use in the innovation marketplace. However, both the law of patent misuse and antitrust case law might find bundling arrangements illegal before their efficiency-enhancing effect have been fully assessed. This Article suggests that lawmakers incorporate an analysis of this effect into these laws, reducing patentees’ concern about legal liabilities when they enter bundling arrangements that promote innovation. Second, for certain technology users, only ex ante patent licensing transactions can lead to efficient outcomes. The high transaction costs of detecting licensing opportunities can impede ex ante transactions. This Article suggests policymakers lower these costs by making relevant patent documents easier to locate and read, and link them to a platform that allows patentees to present information about the complementary assets that they are willing to transfer. This Article then provides a detailed empirical account of the contractual bundles in patent licensing transactions. It also demonstrates how contracts can promote innovation by overcoming the limitations of the patent system.
View full article here: https://btlj.org/wp-content/uploads/2023/02/0004-37-1-Guan.pdf.
Author: Taorui Guan
Published in Berkeley Technology Law Journal, University of California at Berkeley, Boalt Hall School of Law, 2023, v. 37, Issue 1.