Peter Lee, ‘Patent Law’s Externality Asymmetry’

ABSTRACT
Technologies such as social media, autonomous vehicles, and ‘big data’ analytics generate enormous benefits for society, but they also create substantial harms. Social media networks spread misinformation, autonomous vehicles threaten driving jobs, and predictive policing based on big data can lead to unreasonable searches and seizures. One of the most significant ways that technology impacts society is by producing externalities – external benefits and costs that a decisionmaker (such as an inventor) imposes on third parties without charge or compensation. Externalities can cause inefficient resource allocation, and the classic remedy is to ‘internalize’ such externalities by holding decisionmakers more accountable for the benefits and costs of their actions. Patents, which confer exclusive rights on new inventions, enable inventors to internalize a share of positive externalities from technology, thus maintaining incentives to invent. However, inventions also produce harms, and how patents treat negative externalities from new technologies has been largely overlooked. This Article is the first to extensively examine this issue. It argues that while patents internalize positive externalities associated with innovation, they do surprisingly little to internalize negative externalities. This Article refers to this underappreciated dynamic as patent law’s externality asymmetry …

Lee, Peter, Patent Law’s Externality Asymmetry (October 17, 2021). 43 Cardozo Law Review (forthcoming 2022).

First posted 2021-10-19 10:00:08

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