Author: Robin Feldman
Abstract: It is axiomatic that patents promote success. And yet, a contrary notion—that the patent incentive for medicine should be sufficient to compensate for the losses incurred when research fails—is quietly permeating modern court decisions, commentary, and Congressional discussions, coloring debates relating to pricing and regulation of medicine. The conceptualization is moving forward unchallenged, as if failure compensation follows logically from the innovation incentives built into the patent construct. As this article demonstrates, however, the notion is antithetical to patent law, putting modern conceptualizations on a collision course with the history and theory of patents reaching back to this nation’s inception.
Reviewing patent theory, federal statutes and cases from 1790 to 1865, and economic analyses, this article demonstrates the fallacy of creating incentives to fail. From a theoretical perspective, although patents are designed to encourage innovation, a patent is not a participation trophy. One does not receive a patent for an invention one tried and failed to create, and the patent reward is based on success, rather than failure. From a historical perspective, with limited exceptions, early patent law reveals no act or case suggesting that a patent grant is intended to compensate the patentee even for the costs of developing a successful (i.e., patented) invention, let alone other research failures. Finally, the notion of compensating for failures denies the economic logic of the patent system. Failure compensation has the effect of encouraging inefficient invention and leads to a perverse reality in which the more one fails, the higher the compensation.
Citation: Feldman, Robin, Rewarding Failure with Patents (August 3, 2022). Yale Journal of Health Policy, Law, and Ethics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4223347
