Patent Republics

This Article examines whether patent holders encourage innovation through democratic royalty sharing. This question is prompted by a developing belief among legal commentators and industry participants that private cooperation can remedy widespread transactional problems that threaten innovation. Until now, however, scholars have not examined the internal governance of patent licensing collectives. Drawing on dozens of original patent licensing contracts in force between 1856 and 2010, this Article studies the dynamic voting procedures and static rules that governed royalty apportionments. At its heart, this is an examination of the dynamism in collectives and the degree of control over pricing that members enjoy. The agreements examined in this Article reveal a surprising variety of approaches to cooperative patent pricing, including majority voting systems, expert valuations, and “rough and ready” rules. These results reveal that innovation is sometimes best encouraged by “rough and ready” rent-sharing rules that are imperfect by design rather than carefully-tuned cooperative pricing systems. This insight and others shape an urgent new view of how patent licensing collectives can foster innovation. * Associate Professor of Law, Indiana University Maurer School of Law; Microsoft Research Fellow (2011-2012), U.C. Berkeley School of Law. WORKING PAPER VERSION © 2012 Michael Mattioli 6/20/12