Optional prize plan risk looting, lobbying and government confiscation of patents

There are significant “public choice costs” under either of the optional prize plans. By this I mean there are risks of inappropriate transfers to patentees2 – that is, looting – and of confiscation of patentees, through the conduct of or through the omissions of government agents, sometimes working at the behest of private agents. I will argue that the confiscation risk appears to dominate.

The public choice costs point to a broader set of constraints that should be incorporated into any analysis of the patent system. There are rational actors operating at all levels, from patentees to licensees, and government actors. A discretionary prize system, where the government awards prizes and no enforceable patents, would invite lobbying and third-party interference in the determination of the award. Even in a prize process effectively shielded from third-party interference, government would confiscate patents on a regular basis.