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April 28, 2009

Patent Thickets, Private Ordering, and the Sewing Machine

Posted by Gordon Smith

Adam Massoff has a fascinating post at Volokh Conspiracy, describing a piece of his new paper, A Stitch in Time: The Rise and Fall of the Sewing Machine Patent Thicket. I was especially intrigued by this passage:

The Sewing Machine War came to an end with the voluntary formation of the Sewing Machine Combination. In this respect, the Sewing Machine Combination reveals how patent-owners have substantial incentives to overcome patent thickets, even in contexts in which so-called “patent trolls” are exploiting the strong enforcement of the property rights in patents. The Combination was formed though pre-existing private-ordering mechanisms, such as contract and corporate law, and not through judicial decisions, PTO regulations, or statutes that limited or restricted the patent-owners’ property rights. In sum, the Sewing Machine Combination reveals the innovative ways in which patent-owners can rescue themselves from commercial gridlock, and in so doing, unleash an explosion in productivity and innovation.

Adam's case study is another fine piece of work in the legal literature on private ordering. We still have a shortage of such work, but I am optimistic about the number of young legal scholars who are entering this area of scholarship.

UPDATE: Speaking of private ordering, Michael Risch has a new piece ("Patent Challenges and Royalty Inflation") about the inalienability of patent challenge rights. This world with constrained private ordering results in a "patent challenge tax" that, according to Michael, leads to "royalty inflation ..., trickle-down costs to consumers and disincentives to create and license patented technology." Sometimes I wish I were writing about patents. It seems like these folks are having a lot of fun.

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