Increasing Returns in the Patent System: Institutional Sources and Consequences for Law

This paper critically analyses the impact of the institutional set up of UK and US patent systems on the optimality of patent law. Based on recent work on institutionalism, the author argues that the patent system is subject to increasing returns processes or positive feedback, where the probability of further steps along a given legal sequence increases with each move down that path. In an analysis that puts temporality at the heart of the argument, this paper shows how the interactions between key institutions in the patent system can result in doctrinal incoherence. Prominent sources of increasing returns in the patent system are inter-institutional linkages, legal authority exercised by prominent institutions and the intrinsic and extrinsic uncertainty associated with patents. The inadequacy of corrective mechanisms intensifies increasing returns. In such circumstances even early or tentative commitments made to policies and legal standards become tenacious while the costs of policy reversal grow and grow and become prohibitive. The result is a legal system plagued by the possibility of bizarre and unpredictable outcomes.