State patent laws decrease innovation

State laws can upend this balance in either direction. State laws that try to narrow exclusive rights, compared with the rights created by the federal patent system, reduce the innovation incentives by reducing the benefits created by the patent system. State consumer-protection laws that erect barriers to bringing patent claims, for instance, make it harder for patent holders to assert legitimate patent rights, reducing the value of those rights and, thus, reducing the ex ante incentive to invest in new inventions. On the other hand, state laws that try to expand exclusive rights beyond the limits of patent law impinge on the public’s right to use ideas from the public domain. But a robust public domain is one of the goals of the patent system, not some sort of loophole that must be closed, so these laws equally upset the patent system’s balance. This latter concern about narrowing the public domain has been key in several Supreme Court cases on the preemptive effect of patent law. For instance, in Sears, Roebuck & Co. v. Stiffel Co., the Court held that a state unfair-competition law could not be used against a company that sold knock-offs of a competitor’s lamp design, when the original lamp was unprotected by patent law.50 The Court explained that the patent system exists to solve an economic problem: “Patents are not given as favors, . . . but are meant to encourage invention by rewarding the inventor with the right, limited to a term of years fixed by the patent, to exclude others from the use of his invention.”51 But once that exclusivity has expired, the public’s interest takes over: “[I]n rewarding useful invention, the rights and welfare of the community must be fairly dealt with and effectually guarded. To that end the prerequisites to obtaining a patent are strictly observed, and when the patent has issued the limitations on its exercise are equally strictly enforced.”52 And since the patent laws exist to promote both new innovations and a robust public domain, states cannot interfere with the balance Congress has struck between these competing objectives. This is true regardless of the specific means employed: “Just as a State cannot encroach upon the federal patent laws directly, it cannot, under some other law, such as that forbidding unfair competition, give protection of a kind that clashes with the objectives of the federal patent laws.”53