Risk Taking and Rights Balancing in Intellectual Property Law

Scholars have long worried that risk aversion can have significant negative effects in the marketplace. In the intellectual property law domain, some have worried that risk-averse actors can negatively influence the development of important intellectual property law doctrines, which can ultimately hamper innovation. For instance, risk-averse actors may frequently choose to obtain licenses for rights that the relevant laws do not actually require of them. When they do so, they inadvertently increase the scope of intellectual property rights because their risk-averse activities inform courts’ development of key intellectual property law doctrines. In this Article, prepared as part of the IP Scholars Forum at Akron Law, I look at the other side of the risk coin. In particular, I argue that early-stage companies, and sometimes later-stage companies as well, are often willing to take on significant intellectual property risks in pursuit of commercial opportunities. And by providing courts with opportunities to take head-on key intellectual property questions, these risk-taking activities, in effect, may often help counterbalance whatever negative effects the behavior of risk-averse actors entails. I examine reasons why both types of entities are often willing to take on intellectual property risks. And I review a number of examples where both early and later-stage companies have heavily influenced the development of key intellectual property law doctrines by being willing to take their intellectual property disputes to court. This review, however, highlights several reasons why early-stage companies are more dependable risk-taking entities than later-stage companies. I thus conclude by briefly assessing two intellectual property-related means by which to specifically encourage early-stage companies to continue to take on intellectual property risks.