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The Economic Logic of the Patent System

Paul Mahoney

Paul G. Mahoney

Intellectual property has long been one of the Law School’s strengths. Professor Edmund Kitch, who has taught at Virginia for the past three decades, is the author of one of the most insightful and influential articles ever written on patent law. In “The Nature and Function of the Patent System,” published in 1977 in the Journal of Law & Economics, Ed pointed out that the traditional description of the patent system as a means of rewarding inventors and thus spurring innovation was seriously incomplete. In order to understand the details of the system, such as priority and time-bar, one must recognize that they create strong incentives to file patent applications early — often well before the use of the new technology is economically viable. This incentive structure, Ed observed, permits those who “discover” a new technology to publicize their discovery and transfer it to anyone who can better exploit it, not unlike the system of establishing claims to minerals found on public lands. To this day the article is a must-read for anyone seeking to understand the economic logic of the patent system. While Ed was the leading patent scholar at the Law School, now-retired Professor Lillian BeVier coupled her scholarship on the First Amendment with teaching and writing on the “expressive” areas of intellectual property, copyright and trademark.

In recent years, the Law School has been fortunate to add a new generation of outstanding intellectual property scholars, several of whom contributed ideas to this issue of the UVA Lawyer. Professor Chris Sprigman has gained recognition as the principal theorist of intellectual property’s “negative space” — areas where innovation flourishes despite the absence of effective intellectual property rights. His scholarship, some of it jointly written with Professor Dotan Oliar, another of the Law School’s gifted young intellectual property scholars, has studied innovation in industries as diverse as fashion, cuisine, and stand-up comedy.

The Law School is also fortunate to have added two leading patent scholars to the faculty. Margo Bagley, who holds a degree in chemical engineering, worked in research and development with Proctor & Gamble, and is the co-holder of a patent, combines deep practical experience with careful theoretical insights. She is a member of the board of directors of the Public Patent Foundation and has served on a committee of the National Academy of Sciences focused on how universities manage their own intellectual property portfolios. John Duffy, who joined the faculty last year, was named by the American Lawyer as one of the 25 most influential people in the nation in intellectual property. The U.K. publication Managing Intellectual Property has similarly named him one of the 50 most influential in the world. Like Margo, John brings deep practical experience, in his case on the litigation and advisory side, to the legal academy.

This issue showcases our intellectual property faculty and several alumni of the Law School who are on the front lines, including retired Chief Judge Paul Michel ’66 of the United States Court of Appeals for the Federal Circuit, T.J. Angioletti ’92, Chief IP Officer for Netflix, Eric Tassone ’98, who followed his JD with a Ph.D. in biostatistics and is now a statistician and quantitative analyst for Google, and Chris Hockett ’85, a litigation partner with Davis Polk. They analyze the operation of the patent granting and litigation system in light of an explosion in innovation and patent volume.

From the perspective of patent-intensive industries, the features of the patent system that serve the “prospecting” function Ed Kitch described 35 years ago are double-edged swords. The fact that one can patent a new technology without practicing it leads to early disclosure and accelerated commercial use of new ideas. But it has also led to the rise of the “patent troll,” who acquires patents not to create new products, but to look for infringers to sue. At the same time, the complexity and breadth of new technologies potentially subject to patent has stretched the resources of the Patent and Trademark Office. I hope you enjoy the discussion of these timely and important issues.

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Our graduates followed this summer’s crisis at the University with concern. Many continue to wonder how the University’s governance structure is functioning in the light of President Sullivan’s reinstatement. We therefore thought you would be interested in Professor George Cohen’s recent remarks to the Board of Visitors, which we have edited and present herein. George, as most of you know, is the chair of the Faculty Senate and as such played a highly visible role in this summer’s events.