The Independent - Invention Defense in Intellectual Property

Patents di®er from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior in any industry where the cost of independently inventing a product is not too much less than (no less than half) the inventor's cost. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Second, a defense of independent invention would reduce the wasteful duplication of R&D e®ort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' pro ̄ts to levels commensurate with their costs of R&D.