Patents encourage rapid exploitation, preventing any mitigation of externalities.

Contrary to this received wisdom, however, patents do little to internalize negative externalities. Many mechanisms by which physical property rights internalize negative externalities do not apply, or do not apply to nearly the same extent, to patents. First, patents do not internalize negative externalities associated with the tragedy of the commons because this tragedy does not apply to the nonrival technical information at the heart of inventions. Such technical information cannot be overconsumed, and so the tragedy of the commons is inapposite. More importantly, rather than encouraging patentees to conserve protected assets, the time-limited nature of patents encourages them to exploit technologies rapidly. Such rapid exploitation is not conducive to patentees engaging in unhurried consideration and mitigation of externalities. Second, patents do not realistically facilitate efficiency-maximizing transactions between technology owners and individuals harmed by their technologies. Although patents lower some transaction costs, private negotiations remain prohibitively costly due to the large number of parties involved and the availability of technological substitutes for any given patented invention. Third, unlike property rights, patents create no duties for resource owners to limit harms imposed on external parties. Nobody has a right to be free from the effects of a patented invention. In sum, patents are a one-way ratchet that allows patentees to internalize positive externalities from technological innovation but does very little to internalize associated negative externalities.