Patent Schisms

• Author: Clark D. Asay
• Position: Associate Professor of Law, BYU Law School. J.D., Stanford. M.Phil, University of Cambridge
• Pages: 45-92

45

Patent Schisms

Clark D. Asay*

ABSTRACT: Parties frequently obtain pa tents for one purpose, only to use

those patents for another. This Article cal ls such divergences between parties’

initial motivations to obtain patent s and those patents’ predominant u ses

later on “patent schisms.”

Because traditional patent law theories typic ally treat the purposes of patents

as static, scholars have neglecte d to explicitly examine patent schisms and the

reasons behind them. This is so despite the pervasiveness of patent schisms in

a variety of important contexts. Those contexts i nclude the patenting

behaviors of early-stage companies, later-stag e companies, so-called “patent

trolls,” and universities. In fact, patent schisms lie at the heart of some of the

most controversial patent law topics, including whether patents should be

considered a form of personal property or, i nstead, as a regulatory right.

This Article examines patent sch isms and adds to the patent literature in three

principal ways. First, it provides an a ccount of the ubiquity of patent schisms

in a variety of important settings. Second, it a rticulates three theories

explaining how and why patent schisms arise. These hy potheses include the

proposition that patenting an invention oft en creates economic and

psychological incentives to ultim ately use that patent in defiance of a pa rty’s

original motivation to obtain the pa tent. Finally, the Article examines the

normative and theoretical impli cations of the pervasiveness of patent schisms

and the explanations behind them. These include briefly assessing whether

treating patents as a form of perso nal property is the correct approach to

ensuring that the patent system serves its constitutional purpose of promoting

the progress of “science and the useful arts .”

I. INTRODUCTION ............................................................................. 46

II. THE PURPOSES AND USES OF PATENTS .......................................... 50

A. WHY PARTIES OBTAIN PATENTS ............................................... 50

B. HOW PARTIES USE PATENTS ..................................................... 52

1. Early-Stage Companies .................................................. 53

* Associate Professor of Law, BYU Law School. J.D., Stanford. M.Phil, University of

Cambridge. Thanks to Stephanie Plamondon Bair and Paul Stancil for hel pful comments on

earlier drafts of this Article .

46 IOWA LAW REVIEW [Vol. 104:45

2. Established Companies .................................................. 55

3. Patent Trolls ................................................................... 57

4. Universities ..................................................................... 59

III. EXPLAINING PATENT SCHISMS ....................................................... 66

A. UNDER PRESSURE .................................................................... 66

1. Economic Pressure ........................................................ 66

2. Psychological Pressure ................................................... 70

B. CHANGING CIRCUMSTANCES ..................................................... 73

C. INTRA-ORGANIZATION HETEROGENEITY .................................... 78

IV. IMPLICATIONS ............................................................................... 81

A. PATENT DYNAMISM ................................................................. 82

B. EMPIRICAL WORK ON THE PURPOSES BEHIND PATENTING ........... 89

V. CONCLUSION ................................................................................ 91

I. INTRODUCTION

Why parties pursue patents and how parties ultimately use those patents

are often treated as two sides of the same coin. For example, when Apple

recently asserted several of its mobile-device patents against Samsung in high-

stakes patent litigation,1 one might view that assertion as evidence that Apple

initially obtained the patents in order to fend off purported copyists such as

Samsung.2 Or, when high-tech companies use patents defensively to deter

patent assertions against them, scholars might ascribe the party’s motives for

pursuing such patents as simply that: to better protect their freedom to

operate.3

Yet while the reasons parties pursue patents and the ultimate uses of

those patents may often be in sync, in many other cases they are not. A start-

up company, for instance, may obtain patents primarily in order to attract

venture capital funding. 4 But later on, if the start-up becomes a public

company, that company may view its patents primarily as assets t o be

monetized through licensing or litigation.5 As another example, a large

1. For some partial history of this case, see Adam Liptak & Vindu Goel, Supreme Court Gives

Samsung a Reprieve in Apple Patent Case, N.Y. TIMES (Dec. 6, 2016), https:/ /www.nytimes.com/

2016/12/06/technology/samsung-apple-smartpho ne-patent-supreme-court.html.

2. See, e.g., Jeanne C. Fromer, Expressive Incentives in Intellectual Property, 98 VA. L. REV. 1745,

1750–52 (2012) (describing predominant p atent law theory articulating this view).

3. Colleen V. Chien, From Arms Race to Marketplace: The Complex Patent Ecosystem and Its

Implications for the Patent System, 62 HASTINGS L.J. 297, 303–10 (2010) (describing the development

of defensive uses of patents).

4. Clarisa Long, Patent Signals, 69 U. CHI. L. REV. 625, 644–45 (2002).

5. IBM is a good example of a company that has signific antly repurposed many of its patents

for monetization as it changed its IP strategy. See John C. Dvorak, IBM Is the World’s Biggest Patent

2018] PATENT SCHISMS 47

public company may churn out patents primarily in order to build a large

defensive patent portfolio, but later on decide that the best use for many of

those patents lies in aggressive patent monetization efforts.6

Hence, why parties obtain patents and how they ultimately use those

patents are distinct events with often differing motivations. Yet despite the

likely frequency of such schisms in purpose, scholars have devoted little

explicit attention to analyzing why and how such schisms develop.7 Scholars

have spent considerable time proposing a number of distinct theoretical

purposes that patents may serve.8 In doing so, scholars have recognized one

aspect of the patent system’s dynamism.9 But scholars up till now have

neglected to explicitly focus on another important dimension of that

dynamism: that patent owners frequently toggle between heterogeneous uses

of the same patent throughout its roughly twenty-year lif ecycle.10 This Article

takes up that task.

Scholars have also spent considerable time analyzing discrepancies

between patent law’s purported purposes and patent law as implemented,

including ways in which patents are used in defiance of those purposes.11 But

this Article, rather than focusing on discrepancies between patent law’s

purposes and whether patents are currently serving those purposes, instead

homes in on schisms between a patent owner’s own motivation in pursuing a

patent and how the patent is ultimately used. Furthermore and importantly,

it seeks to explain how and why these discrepancies arise, which questions

scholars have, at most, only implicitly addressed.

These questions are important for at least three reasons. First, as Part II

will explore, discrepancies between t he purposes for which parties obtain

patents and the ultimate uses of those patents—what I will hereafter refer to

as “patent schisms”—appear to be pervasive in a variety of important settings.

Troll, PCMAG (May 4, 2016, 8:00 AM), http://www.pcmag.com/ar ticle2/0,2817,2493155,00.asp

(describing the transition of IBM from a product producer to a patent lice nsing outfit).

6. See generally Jeremy W. Bock, Patent Quantity, 38 U. HAW. L. REV. 287 (2016) (discussing

the propensity of large firms to engage in “patent harvesting”).

7. For an example of scholarship that comes close, see generally Jeanne C. Fromer, Should

the Law Care Why Intellectual Property Rights Have Been Asserted?, 53 HOUS. L. REV. 549 (2015)

(assessing discrepancies between the purposes of patent law and how some parties actually use

their patents).

8. See infra Section II.A.

9. See generally, e.g., Colleen V. Chien, Opening the Patent System: Diffusionary Levers in Patent

Law, 89 S. CAL. L. REV. 793 (2016) (explori ng ways by which to make the pate nt system more

conducive to dynamic uses of pa tents).

10. Id. at 815–17.

11. See generally, e.g., JAMES BE SSEN & MICHA EL J. MEURER , PATENT FAILURE: HOW JUDGES,

BUREAUCRATS, AND LAWYERS PUT INNOVATORS AT RISK (2008) (arguing that patent law as

implemented threatens the very purposes for which patents are intended and proposing judicial

solutions to this crisis); DAN L. BURK & MARK A. LEMLEY, THE PATENT CRISIS AND HOW THE COURTS

CAN SOLVE IT (2009) (describing how patents often fail to promote innovation except in a few

industries); Fromer, supra note 7.