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Oxford Journal of Legal Studies Advance Access originally published online on November 19, 2007
Oxford Journal of Legal Studies 2007 27(4):707-740; doi:10.1093/ojls/gqm021
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© The Author 2007. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Patents as Credence Goods

Sivaramjani Thambisetty*

* Lecturer in Intellectual Property Law, London School of Economics and Political Science. Email: S.Thambisetty{at}lse.ac.uk


  Abstract

The view of patents as well-defined property rights is as simplistic as it is ubiquitous. This article argues that in newly arising or immature technologies, patents are subject to intrinsic and extrinsic uncertainty that make them very opaque representations of the underlying inventions. The opacity is a result of unsettled legal doctrine and scientific terminology, uncertain commercial and technological prognosis, and leads to considerable ambiguity in property parameters. Patents in immature technologies do not solve Arrow's information paradox of non-rivalrous goods because they do not represent the sharp exclusive right that is central to his thesis. In such cases patents ought to be reclassified in terms of their perceived and actual function as credence goods. The difficulty in discovering the value of these patents necessitates credence verifiers, further increasing the transaction costs of encouraging innovation. The theoretical and empirical implications of credence explored in this article are based primarily on the Anglo-American legal protection of biotechnological inventions, but may be equally relevant to patents in general and patents in other newly arising technologies, in particular.


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