Patent buyouts will fail – too many practical barriers – operational cost, distortive rent seeking and desirability concerns
Ben van Hout, Jolian McHardy and Aki Tsuchiya Patent Purchase as a Policy for Pharmaceuticals ISSN 1749-8368 SERPS (Sheffield Economic Research Paper Series) no. 2015007 Originally Published: March 2015 Updated: December 2015 serps_2015007.pdf
Patent “buyouts” involve the government buying the patent from the innovating firm and placing it in the public domain, replacing Intellectual Property (IP) protection and associated profits with a prize for the innovator. Placing the innovation in the public domain, in theory, eradicates monopoly price distortions as well as disincentivising duplicative research. Although patent buyouts is not a new idea (e.g. the Daguerreotype photography patent was subject to a buyout by the French government in 1839) and the arguments relating to their potential benefits 2 have been documented for some time (e.g. Marshall, 1890; Wright, 1983), they have so far failed to become an established policy option. Practical barriers and difficulties associated with their implementation include funding operational costs, possible distortive rent seeking and lobbying concerns as well as considerations about which patents to buyout and the compensation for the innovator.