49 Emory L. J. 823 (2000)
Proprietary Rights and Why Initial Allocations Matter

handle is hein.journals/emlj49 and id is 833 raw text is: PROPRIETARY RIGHTS AND
Clarisa Long*
Initial allocations of proprietary rights matter because who starts out
holding the rights helps determine who ends up holding the rights. In patent
law, proprietary rights are granted to those who are first to invent.! But entities
who win the race to patent an invention are not necessarily the final, or best, or
most efficient users of the technology. If proprietary rights, particularly
patents on basic research results, could be traded efficiently so that
downstream innovators could obtain them from initial rights holders easily,
then initial allocations of proprietary rights would not matter so much.
Transferring proprietary rights is costly, however, which often makes it
difficult to achieve the highest and best use of such rights. In addition to
transaction costs, uncertainty over whether patented basic research results can
be turned into commercially viable products can cause bargaining breakdown.
Faced with uncertainty, parties to a licensing transaction may rely on proxies to
establish a value for the patented basic research results. Such proxies may be
driven by the reputation of the initial rights holder rather than by the qualities
of the technology being licensed. The characteristics of the initial rights holder
and the strength of its bargaining position thus become important elements in
determining whether proprietary rights get transferred and if so, under what
terms. Because initial allocations drive final allocations, initial allocations
matter in achieving the best and most efficient use of proprietary rights.
Proprietary rights to the products of biomedical research have been
controversial for quite some time. At first, the debate centered around whether
the products of life were patentable and whether proprietary rights were
desirable and consistent with the norms of science.2       The United States
* Associate Professor of Law, University of Virginia School of Law. B.A., University of Illinois (1989);
B.S., University of Illinois (1989); J.D., Stanford University (1994). I would like to thank Lillian Bevier, Julia
Mahoney, and J. Hoult Verkerke for their helpful comments.
1 35 U.S.C.  102 (1994).
2 Robert K. Merton, The Puritan Spur to Science, in THE SOCIOLOGY OF SCIENCE: THEORETICAL &
EMPI.ICAL INVESTIGATION 228 (Robert K. Merton ed., 1973).

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