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10 APLA Q. J. 14 (1982)
Does the Patent System Have Measurable Economic Value

handle is hein.journals/aiplaqj10 and id is 16 raw text is: DOES THE PATENT SYSTEM HAVE MEASURABLE ECONOMIC VALUE? BY LEONARD PRUSAK I. Introduction It was Thomas Jefferson who first recognized the economic rationale of the patent system. I As Secretary of State, as a member of the group which ad- ministered the Patent Act of 1790 and as author of the 1793 Patent Act, he was the individual most closely connected with the birth of the U.S. Patent Laws. He rejected the natural rights theory of an inventor to his discoveries and focused on the proposition that the statutory grant of an exclusive right to an invention is both a reward and an inducement to promote innova- tion-a reward for what was done and an inducement to do more. The reasoning goes something like this: The patent system is designed to in- duce inventive activity which would not otherwise be undertaken. The motivation for invention is the expectation that financial rewards will ex- ceed the costs of research, discovery and marketing. For society as a whole, it is the potential gain in the form of new products, processes and disclosed knowledge that spurs search for the new. As long as the gains to society ex- ceed the social costs of the monopoly grant, society will continue to en- courage innovation. In economic terms, the system performs optimally if it produces marginal social benefits equal to the marginal social costs it im- poses. I Furthermore, for an economic system to operate efficiently, information must flow freely. Both producers and consumers must be fully informed decision-makers because ignorance leads to inefficient allocation of re- sources. However, most information is not costless. Inventions are ad- ditions to the nation's stock of knowledge, but if such information were made freely available as soon as it was discovered, there would be no in- centive for anyone to incur the costs and the risks involved in undertaking the research that results in such discoveries. Hence, a reward is necessary. The monopoly grant in the form of a patent serves as such reward., The Jeffersonian concept of an economically viable patent system has sur- vived and prospered for nearly two centuries. Nevertheless, it has had, 1. Graham v. Deere, 383 U.S. 1,156 Ed. 2d 545 (U.S. Sup. Ct.) 148 USPQ 459 (1966); Writings of Thomas Jefferson (Washington Ed.) at p. 180 (1814). 2. Markham, Jesse W., Inventive Activity; Government Controls and the Legal En- vironment, The Rate and Direction of Inventive Activity, National Bureau of Economic Research, Princeton, N.J. (Princeton University Press, 1962). 3. The Economics of the Patent System, Special Report, Public Policies Department, Hoffman-LaRoche Inc., Nutley, N.J. (October 1, 1974) pp. 5-6.

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