This article originally appeared in McCombs TODAY, the McCombs School of Business blog.
Patents are like maps showing the way to hidden treasure. By disclosing the details of new inventions and improvements, the patent system reveals to the public what would otherwise be kept secret and brings to light things that could stand improving and their proposed solutions. The system also allows access to a huge repository of technical knowledge — some of which is not available anywhere else — a virtual goldmine for inventors.
But holding the map doesn’t automatically bring you riches.
Granting patents “comes at a cost to society,” said John Allison, a professor in the Business, Government and Society Department who has devoted much of his career to the empirical study of patents. Since they “allow the owner to prevent others from making, using or selling a product or process patents, by their nature, limit competition.” Sometimes referred to loosely as monopolies, patents have the potential to “increase prices and decrease choices among the consuming public” for a meaningful period of time.
Patents are especially costly to companies that unwittingly infringe upon them. “There are literally thousands of companies involved in patent infringement litigation annually,” Allison said. And when patent owners win their cases, a not infrequent occurrence, companies stand to lose “staggering amounts of money a multimillion dollar liability.”
But with more than 1.8 million active patents out there — many with little or no economic value — it is difficult to know which are likely to pose a threat to the activities of competitors.
