An Economic Review of the Patent System

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An Economic Review of the Patent System

Fritz Machlup
Patent, the adjective, means "open," and patent, the noun, is the customary abbreviation of "open letter." The official name is "letters patent," a literal translation of the Latin "litterae patentes." Letters patent are official documents by which certain rights, privileges, ranks, or titles are conferred. Among the better known of such "open letters" are patents of appointment (of officers, military, judicial, colonial), patents of nobility, patents of precedence, patents of land conveyance, patents of monopoly, patents of invention. Patents of invention confer the right to exclude others from using a particular invention. When the term "patent" is used without qualification, it nowadays refers usually to inventors' rights. Similarly, the French "brevet," derived from the Latin "litterae breves" (brief letters), is a document granting a right or privilege, and usually stands for "brevet d'invention." Defined more accurately, a patent confers the right to secure the enforcement power of the state in excluding unauthorized persons, for a specified number of years, from making commercial use of a clearly identified invention. Patents of invention are commonly classed with other laws or measures for the protection of so-called "intellectual property" or "industrial property." This class includes the protection of exclusivity for copyrights, trademarks, trade names, artistic designs, and industrial designs, besides technical inventions; other types of "products of intellectual labor" have at various times been proposed as worthy of public protection. It has seemed "unjust" to many, for example, that the inventor of a new gadget should be protected..., while the savant who discovered the principle on which the invention is based should be without protection and without material reward for his services to society. Yet, proposals to extend government protection of "intellectual property" to scientific discoveries have everywhere been rejected as impractical and undesirable. ....

The oldest examples of grants of exclusive rights by kings and rulers to private inventors and innovators to practice their new arts or skills go back to the 14th century. Probably the first "patent law," in the sense of a general promise of exclusive rights to inventors, was enacted in 1474 by the Republic of Venice. In the 16th century, patents were widely used by German princes, some of whom had a well-reasoned policy of granting privileges on the basis of a careful consideration of the utility and novelty of the inventions and, also, of the burden which would be imposed on the country by excluding others from the use of these inventions and by enabling the patentees to charge higher prices. Some of the exclusive privileges were on new inventions; others on skilled crafts imported from abroad. Some... for limited periods; others forever. (For example, the canton Bern in Switzerland granted in 1577 to inventor Zobell a "permanent exclusive privilege.") Some... privileges granted protection against imitation and... thus created monopoly rights. Others, however, granted protection from the restrictive regulations of guilds, and thus were designed to... increase competition. In view of the latter type of privilege, patents have occasionally been credited with liberating industry from restrictive regulations by guilds and local authorities and with aiding the industrial revolution in England. In France, the persecution of innovators by guilds of craftsmen continued far into the 18th century. (For example, in 1726, the weavers' guild threatened design printers with severe punishment, including death.) Royal patent privileges were sometimes conferred, not to grant exclusive rights, but to grant permission to do what was prohibited under existing rules. ....

The Chief Arguments for Patent Protection
While the early opinions on the patent system were expressed merely in occasional comments and remarks...
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