Debunking the Myth that Patents Create a Monopoly

Many inventors operate under the misunderstanding that getting a patent is like owning Boardwalk and Park Place in the popular board game “Monopoly.” Unfortunately, turning a patent grant into cash is much more complicated than simply placing hotels on Boardwalk and Park Place.  Those who are against patents always seem to argue that a patent is a monopoly, or at least use those terms interchangeably.  Don’t be fooled into thinking that a patent is a monopoly.  Simply obtaining a patent will not result in the arrival of a money truck to your doorstep.

Just because an inventor has been granted a patent does not mean that there will be a market for the patent product, and without a market there can be no monopoly. The patent only gives the patent owner the right to exclude others from making, using, selling and importing. A patent carries with it no expectation for market success. Granted, if the product does have a market a patent can be a significant barrier to entry that insulates the patent owner from competition, but a patent in and of itself does not guarantee business success.

A patent only dangles the opportunity to achieve monopoly profits. This is due to the exclusive nature of the right and the ability to be the only player in the market. Again, a market is necessary, which means a product that people are willing to pay for is a pre-requisite. In the absence of a product that people want, and the business acumen to capitalize on a market opportunity, a patent will not result in riches.

if ( !function_exists(‘dynamic_sidebar’) || !dynamic_sidebar(‘Content Inventors’) ) : ?>
Chief Judge Markey, the first Chief Judge of the Court of Appeals for the Federal Circuit, time and time again reprimanded scholars, attorneys and fellow judges for characterizing a patent grant as a conference of a monopoly. In Carl Schenck, A.G. v. Nortron Corp., 713 F.2d, 782, 786 n. 3 (Fed. Cir. 1983), Judge Markey stated:

Nortron begins its file wrapper estoppel argument with “Patents are an exception to the general rule against monopolies…”. A patent, under the statute, is property. 35 U.S.C. S 261. Nowhere in any statute is a patent described as a monopoly. The patent right is but the right to exclude others, the very definition of “property.” That the property right represented by a patent, like other property rights, may be used in a scheme violative of antitrust laws creates no “conflict” between laws establishing any of those property rights and the antitrust laws. The antitrust laws, enacted long after the original patent laws, deal with appropriation of what should belong to others. A valid patent gives the public what it did not earlier have. Patents are valid or invalid under the statute, 35 U.S.C. It is but an obfuscation to refer to a patent as “the patent monopoly” or to describe a patent as an “exception to the general rule against monopolies.” That description, moreover, is irrelevant when considering patent questions, including the question of estoppel predicated on prosecution history.

See also American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1367 (Fed.Cir.) (“The patent system, which antedated the Sherman Act by a century, is not an ‘exception’ to the antitrust laws, and patent rights are not legal monopolies in the antitrust sense of that word.”), cert. denied, 469 U.S. 821, 105 S.Ct. 95, 83 L.Ed.2d 41 (1984); Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1160 n. 8 (6th Cir.1978) (“The loose application of the pejorative term ‘monopoly,’ to the property right of exclusion represented by a patent, can be misleading. Unchecked it can destroy the constitutional and statutory scheme reflected in the patent system.”).

Despite what you may have heard to the contrary, virtually no patent will lock up a market and hold others within the market hostage.  Certainly there can be foundational technologies that are of extreme importance, but those types of inventions are rare.  Most inventions are improvements or incremental advances of different magnitudes.  See Understanding Improvement Patents & Inventions.

It is also important for inventors to understand that patents are fragile rights.  When you define your invention you are essentially placing your stakes in the ground and defining the exclusive rights you now have.  It is hard to define your rights in the first instance with as much specificity and detail as required, while at the same time anticipating what others will do and how they might attempt to get around your rights.  Like most things in life, it is harder to do in the first instance than it is to get around or undo later.  Thus, when you have an innovation and you are making money basic laws of economics suggest that there will be others who will seek to enter your marketplace and compete.  It is that simple.

A patent does not guarantee you the right to exclude others from a market.  A patent provides you the right to prevent others from making, selling, offering for sale or importing an invention that is identical to what you have defined in the claims of your patent.  For that reason when you find an innovation that is lucrative you should not think in terms of getting a single patent, but if there is money to be made others will want into your market so you must think about continually innovating, pushing out the envelope of protection and obtaining more patents.

I tell inventors all the time to model themselves after success, not after failure.  One company that every inventor should learn more about is Apple.  See The Apple Way: Repeated Innovation + Patent = Domination. While they have made some bad business mistakes in the past, they are a true innovator and when they come across an innovation they patent it and continue to advance innovation and push out the envelope of exclusive protection.  This is an excellent model, and one that inventors can learn from.

As with most endeavors, there needs to be an appropriate balance.  I am a fan of provisional patent applications because if they are done appropriately they can be an excellent tool for incrementally going down the road toward obtaining a patent.  They can be economically efficient and in fact far cheaper than a nonprovisional patent application.  They can also be used to lock in whatever rights you have with respect to whatever you are in possession of in terms of innovation right now.  Waiting to perfect the invention and then file a patent application puts you at risk.  Filing early, obtaining some rights and advancing as long as the project continues to make economic sense can be an excellent strategy for independent inventors and small businesses alike.

The moral of the story is this: you need to approach inventing as a business if you are going to make any money doing it.  As you proceed to achieve this goal always keep in mind that if it sounds too good to be true it probably is too good to be true.  The thought that a single patent can lead to a monopoly that unfairly or improperly holds an entire market hostage may sound like a good argument for those who hate patents, and it might sound very appealing for those who are inventors, but the truth is that like so many other things in the innovation space it oversimplifies reality to the point that it is simply incorrect.