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An Economic History of Patent Institutions
Scholars such as Max Weber and Douglass North have suggested that intellectual property systems had an important impact on the course of economic development. However, questions from other eras are still current today, ranging from whether patents and copyrights constitute ideal policies toward intellectual inventions and their philosophical rationale to the growing concerns of international political economy. Throughout their history, patent and copyright regimes have confronted and accommodated technological innovations that were no less significant and contentious for their time than those of the twenty-first century.
The British Patent System
Britain is noted for the establishment of a patent system which has been in continuous operation for a longer period than any other in the world. English monarchs frequently used patents to reward favorites with privileges, such as monopolies over trade that increased the retail prices of commodities. It was not until the seventeenth century that patents were associated entirely with awards to inventors, when Section 6 of the Statute of Monopolies repealed the practice of royal monopoly grants to all except patentees of inventions.
The British patent system established significant barriers in the form of prohibitively high costs that limited access to property rights in invention to a privileged few. Patent fees provided an important source of revenues for the Crown and its employees, and created a class of administrators who had strong incentives to block proposed reforms.
In addition to the monetary costs, complicated administrative procedures that inventors had to follow made transactions costs also high. Thus nation-wide lobbies of manufacturers and patentees expressed dissatisfaction with the operation of the British patent system. However, it was not until after the Crystal Palace Exhibition in 1851 that their concerns were finally addressed, in an effort to meet the burgeoning competition from the United States. In 1852 the efforts of numerous societies and of individual engineers, inventors and manufacturers that had been made over many decades were finally rewarded.
Parliament approved the Patent Law Amendment Act, which authorized the first major adjustment of the system in two centuries.
However, the adjustments made at that time were not completely satisfactory. One source of dissatisfaction that endured until the end of the nineteenth century was the state of the common law regarding patents. British patents were granted "by the grace of the Crown" and therefore were subject to any restrictions that the government cared to impose. According to the statutes, as a matter of national expediency, patents were to be granted if "they be not contrary to the law, nor mischievous to the State, by raising prices of commodities at home, or to the hurt of trade, or generally inconvenient." The Crown possessed the ability to revoke any patents that were deemed inconvenient or contrary to public policy. […]
The Patent System in the United States
The United States stands out as having established one of the most successful patent systems in the world. American industrial supremacy has frequently been credited to its favorable treatment of inventors and the inducements held out for inventive activity. The first Article of the U.S. Constitution included a clause to "promote the Progress of Science and the useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Congress complied by passing a patent statute in April 1790. In 1836 the United States created the first modern patent institution in the world, a system whose features differed in significant respects from those of other major countries.
The primary feature of the "American system" is that all applications are subject to an examination for conformity with the laws and for novelty. An examination system was set in place in 1790, when a select committee consisting of the Secretary of State (Thomas Jefferson), the Attorney General and the Secretary of War scrutinized the applications. These duties proved to be too time-consuming for highly ranked officials who had other onerous duties, so three years later it was replaced by a registration system. The validity of patents was left up to the district courts, which had the power to set in motion a process that could end in the repeal of the patent.
Another important feature of the American patent system is that it was based on the presumption that social welfare coincided with the individual welfare of inventors. Accordingly, legislators rejected restrictions on the rights of American inventors.
Nevertheless, economists such as Joseph Schumpeter have linked market concentration and innovation, and patent rights are often felt to encourage the establishment of monopoly enterprises. Thus, an important aspect of the enforcement of patents and intellectual property in general depends on competition or antitrust policies. The attitudes of the judiciary towards patent conflicts are primarily shaped by their interpretation of the monopoly aspect of the patent grant. The American judiciary in the early nineteenth century did not recognize patents as monopolies, arguing that patentees added to social welfare through innovations which had never existed before, whereas monopolists secured to themselves rights that already belong to the public.[…]
B. Zorina Khan. In: Internet: <http://eh.net/encyclopedia/article/khan.patents> (adapted).
