Patent rights discourage monopolization by encourage knowledge and tech diffusion along with follow on competition

A number of basic practical considerations additionally explain why most patents never lead to a monopoly in the conventional sense.26 Firstly, a number of patented technologies just never lead to a commercial product. For instance, some worthless patents never make it to market, like the “Dining Table Having Integral Dishwasher” issued by the US Patent Office.27 Secondly, patents with commercial applications generally give rise to limited markets in the early days of implementation. And this limits the patent holder’s pricing power: to grow the market for the patented product/technology, the patent holder must make sure he keeps prices/fees at a reasonable level. The literature on innovation policy is replete with cases where patents filed for by universities lead to such a situation.28 Thirdly, as will be seen in section II, even if there is a market for a specific product which is based on a patent, the patent owner will in the large majority of cases not be able to charge monopolistic prices and reduce output at will due to the existence of substitutes. If there are substitute products on the market, a potential buyer can chose which product to buy, and he will go for the cheapest product, or for the product which he believes the most responsive to his needs. That is not only the case for smaller inventors, but also for large companies.29 Fourthly, even if (i) the patented technology makes into a product; and (ii) the product is successful on the market (possibly ending up with a monopoly position), this is not the end of the story. Patent law still seeks simultaneously to encourage R&D dissemination, incremental innovation and follow-on competition by entitling the patent holder to make money through the transfer of his technology to third parties.