Patent Law and Complementary Innovations

The patent system was initially designed to provide incentives to develop stand-alone innovations in \u85elds such as mechanics, chemicals or pharmaceu-ticals. Its application is therefore problematical in more recent \u85elds such as biotechnology and ICT industries, where innovation patterns are di¤erent. A well-known problem concerns cumulative innovations. Patent law must then trade o ¤ the rights granted to upstream patent owners with the incentives to develop subsequent innovations (Scotchmer, 1991; ODonoghue, Scotchmer and Thisse, 1998; Denicolò, 2000). Another issue concerns complementary innova-tions, which are the focus of the paper. When nal products embody several complementary innovations, the scat-tering of patents between various owners jeopardizes the commercial exploitation of the products because of negotiation and royalty stacking issues (Merges & Nelson, 1990; Heller & Eisenberg, 1998; Shapiro, 2001). In biotechnology, this is the case of therapeutic proteins or genetic diagnostic tests that require the use of multiple patented gene fragments (Heller & Eisenberg, 1998). It is als