Publish or perish.

• Author: Parchomovsky, Gideon

INTRODUCTION

The race model has been the darling of patent economists and game theorists.(1) This model assumes that the winner, namely the first to invent, takes the patent grant with the market dominance that comes with it, whereas the second comer, in the best tradition of sports contests, obligingly accepts her loss and quietly vanishes from the scene. While the sports analogy has provided a useful framework for understanding the economics of invention, it has obfuscated an important aspect of the inventive process: the possibility of strategic publication of research findings in order to prevent the issuance of a patent to a competitor. Captured by the sports analogy, patent scholars have consistently presupposed that the loser of a patent race must behave in a sportsmanlike fashion and gracefully accept her fate. But there is no reason whatsoever why competition in the inventive field should conform to the rules of sports.(2)

The stakes and payoff matrices of patent races are considerably different from those of sports contests, and, thus, it is only natural to expect firms in a patent race to deviate from the norms of fair competition in sports. The nature of patent races is much more complex than that of other races. Ceding a patent to a competitor may often spell a substantial drop in revenues for the losing firm, and in some cases may even drive the loser out of the market.(3) Therefore, trying to win the race may not always be the profit-maximizing strategy. Rather, in many patent races the superior strategy for one or more of the competing firms would be to prevent other firms from winning the race by publishing their research findings. Recharacterizing patent races in this way implies that firms that are about to lose in a patent race often face a dilemma all too familiar to academics, the choice of "publish or perish."

The possibility of preemptive publication inheres in every patent system. The point and purpose of the patent grant is to reward innovation.(4) Yet, not all types of innovation are eligible for reward: only inventions that constitute a nontrivial contribution over the prior art qualify for patent protection.(5) This trait of patent protection introduces an important element of relativity into the patent system, turning the prior art into the reference point against which new patents are evaluated. Thus, firms have the power to affect the patentability of their rivals' inventions by altering the state of the prior art. Because any publication immediately becomes part of the prior art, the strategy of preemptive publication allows a firm to render an otherwise nonobvious invention obvious and, as a result, unpatentable. Returning momentarily to the sports analogy, it can be said that preemptive publication shifts the goalpost of patentability, or, more accurately, raises the patentability bar.

A simple example may help illustrate the point. Assume that two firms, A and B, compete for a new computer chip. Suppose that A has an invention that is a clear improvement over prior art -- say, a chip design that is 10% faster than the best chip now available. Although, in principle, A's invention is eligible for a patent, B's involvement in the race may block the patent to A. B can prevent A from obtaining the patent by publishing its design for a 5% faster chip, which, although it is not enough to procure a patent for B, is enough to block A's innovation, making it no longer a significant improvement over prior art.

The Patent Act employs two mechanisms to ensure that only inventions constituting a real inventive leap over the prior art are rewarded: novelty and nonobviousness. The novelty requirement, as embodied in [sections] 102, denies patentability to inventions that were known, used, or described in a printed publication or a patent application at any time prior to filing.(6) The nonobviousness requirement, codified in [sections] 103, reinforces the novelty requirement by limiting patentability to inventions that truly enhance social utility.(7) Together these requirements ensure the basic tradeoff patent law seeks to promote: disclosure of substantially new information in exchange for a limited monopoly grant. At the same time, they also enable the strategy of preemptive publication.

While the novelty and nonobviousness requirements make the strategy of preemptive publication theoretically possible, the nature of the inventive process itself makes it practically feasible. From a practical standpoint, the strategy of preemptive publication is made possible by the lag that exists between the time a firm obtains sufficient research results to effect a change in the prior art and the time it perfects the invention. Under the "first to invent" rule that prevails in the United States, the first firm to reduce an invention to practice is entitled, as a general rule, to patent protection.(8) An invention can be reduced to practice either constructively or actively. A constructive reduction to practice occurs when the patent application is filed. An active reduction requires a showing that at some earlier date the invention actually "work[ed] for its intended purpose."(9) Thus, a firm that elects to pursue a patent must develop a "working model" of the invention. By contrast, a firm that chooses to publish need only possess certain theoretical results that enable the invention, and sometimes even less. Any publication of results may, in principle, raise the nonobviousness standard enough to spoil a patent for a competitor.

The ability to adversely affect the patentability of rivals' inventions through publication explains the otherwise peculiar practice of commercial firms that routinely publish research results in scientific and technological journals. While firms engaging in research and development ("R&D") ultimately wish to obtain patent protection, their research results often fall short of supporting a patent application. In many cases research does lead to improvements over the prior art, but those improvements are insufficient to satisfy the nonobviousness standard. Although minor improvements over the prior art cannot secure a patent grant, they are by no means valueless. The publication of such results alters the chances of rival firms reaching the patent mark and is, thus, of value to the publishing firm.

A firm will choose to publish its research results whenever it believes -- correctly or incorrectly(10) -- that its competitors are likely to beat it to the patent application. Three reasons might account for such a belief. First, a firm may estimate that its rivals are at a more advanced stage in their research, either because they started earlier or because their human resources are superior. Second, due to imperfect access to financial markets, a firm may believe that other firms are able to obtain financing at a lower cost and, as a consequence, file for a patent more quickly. Finally, and relatedly, a firm may prioritize its research projects in a way that prevents it from fully engaging in a particular patent race. In all these instances a firm may find it in its best interest to become a spoiler by resorting to the strategy of preemptive publication.

Preemptive publication offers two important benefits. First, it prevents a rival firm from acquiring an important competitive edge. Preemptive publication enables the publishing firm to block a rival from obtaining a patent and thereby maintain its market position. Furthermore, if the rival firm expended more money on R&D in an attempt to win the patent race, preemptive publication would give the publishing firm a relative advantage over its competitor. Although sunk costs do not on their own affect the relative positions of the firms vis-a-vis present projects, it may affect their financial ability to engage in other research projects in the future. Second, preemptive publication allows the publishing firm to use the information it published in future projects at no cost. In the absence of such a publication, the patent bars all others from using the information disclosed in the patent application without a license from the winning firm. Preemptive publication obviates the need to negotiate such a license. Furthermore, preemptive publication makes it possible for the publishing firm to eventually obtain a patent on variants of the original invention -- or, as they are called in the jargon of patent law, "improvements."

This Article explores the strategy of preemptive publication in patent races and evaluates its welfare implications. In particular, this Article offers three novel insights. First, it demonstrates, contrary to prevailing theory, that the strategy of preemptive publication sometimes dominates the strategy of attempting to win the patent race. An important implication is that firms engaged in a patent race can make a credible threat of publishing their research results and thereby force the likely patentee to negotiate a licensing agreement with them prior to receiving the patent.(11) Significantly, this result alters the prevailing understanding of patent races as "winner take all" games because even second comers may indirectly obtain a share of the patent grant. Second, and relatedly, this Article shows that recourse to preemptive publication can lead to an equilibrium in which none of the competing firms receives a patent. However, no patent will issue in such cases not because the desirable invention cannot be produced, but rather because the knowledge underlying the invention had been made public before its completion. Finally, the Article argues that preemptive publication is likely to promote economic efficiency in industries, such as biotechnology, that depend on access to basic research, and in network markets since it makes valuable information available to the public without the attendant cost of limited monopoly.

In addition, the normative analysis in this Article indicates that an...