Patents are a one-way ratchet that insulates inventors from negative costs- if patent holders benefit from positive 3rd party applications, they should also internalize negative costs.

Given that patents exist to internalize positive externalities from innovation, it is important to consider their role in internalizing associated negative externalities as well. Here, this Article reveals a striking asymmetry. Patents do very little to internalize technology's harmful effects on third parties. Patents operate as a one-way ratchet wherein inventors capture some of the external benefits of their inventions but are insulated from their external costs. In minimal and indirect ways, patents can help to internalize or prevent negative innovation externalities. However, their treatment of such negative externalities is a far cry from how they directly internalize positive externalities.

Patented technologies such as Facebook's filter bubble, autonomous driving innovations, and predictive policing systems generate negative externalities, but patents do very little to internalize them. Patentees of these technologies can profit from practicing these inventions, licensing them to other parties, or suing unauthorized users for infringement. The sweep of patent rights is so broad that Facebook can sue someone for infringement even if Facebook does not practice its invention and even if the infringer did not copy Facebook's technology. However, if Facebook's filter bubble degrades political discourse for millions, patents play no role in internalizing this negative externality. The same is true for patented autonomous vehicle innovations, predictive policing systems, and millions of other proprietary technologies.

At this point, it is helpful to address the potential objection that merely inventing and patenting an invention does not create negative externalities, so it would be inapposite for the patent system to do anything to internalize such externalities. According to this objection, negative externalities only arise from using a technology. Under this view, unlike the factory spewing pollution, simply inventing and patenting a new technology does not harm anyone. Notably, this is the flip side of the economic argument that mere invention itself does not produce social benefit; what matters for social benefit is innovation—the act of putting an invention into practice. 132 This line of reasoning would contend that any negative externalities from technology-such as political polarization, job losses, or unreasonable searches and seizures-only arise when an invention is practiced rather than simply invented. Put differently, the inventor who patents a predictive policing system does not harm others; the police department that uses that system to violate constitutional rights harms others. In this light, because merely inventing a technology does not create external costs, it would be inapposite to expect the patent system to internalize those costs.

However, this argument is misplaced for several reasons. To begin, many inventors patent their technologies and practice them, thus "directly" causing negative externalities. This is the case, for instance, with filter bubble technology, which Facebook developed, patented, and then deployed on its network.

More importantly, the patent system is entirely predicated on allowing inventors to internalize positive externalities from real-world use of their inventions based simply on what their patent disclosures potentially enable. Under the patent quid pro quo, patentees need only provide an enabling disclosure of their technology, yet they get exclusive rights over all physical uses of that technology.133 A patentee does not need to practice an invention to assert exclusive rights against other parties. Furthermore, a patentee does not even have to actually enable another party's use of an invention to sue for infringement; independent inventors who did not copy (or even know about) a patented invention are still liable for infringement.134 Furthermore, patentees have exclusive rights over uses of their technologies that they could not even foresee, as long as those uses fall within the scope of their claims.135 In essence, the sweep of exclusive rights encompasses not only what patentees actually enable, but what they potentially enable. It may seem unfair to hold a patentee accountable when an unrelated entity utilizes a patented technology in a way that harms third parties. By this token, it may seem unfair to provide the patentee with a share of the upside when an independent inventor utilizes a patented technology in a way that benefits third parties. Indeed, some have argued for limiting patent infringement liability to instances of direct copying.136 Within the current framework, however, merely obtaining a patent gives a patentee a claim on third-party benefits from real-world use of an invention. As such, it would appear consistent to also hold a patentee accountable for some third-party costs based on real-world use of that invention.