Economic Theory, Divided Infringement and Enforcing Interactive Patents

High tech companies – especially in the emerging areas of the Internet of Things, wearable devices, and personalized medicine – have found it difficult to enforce their patents on interactive technologies. This is especially true when multiple parties combine to perform all of the steps of a claimed method. This problem is referred to as joint or divided infringement, and some commentators advocate that “interactive” patents susceptible to divided infringement should not be enforced.In contrast, this article argues that economic theory supports the enforcement of interactive patents. Previous papers have analyzed divided infringement problems from a doctrinal and policy perspective. This article is the first to analyze divided infringement from an economic perspective, using three prevalent economic theories of the patent system.Uniquely, all three prevalent economic theories of the patent system – (1) reward theory, (2) prospect theory, and (3) rent dissipation theory – support the enforcement of interactive patents. Reward theory is consistent with enforcing the rights of interactive patents so long as the patent system balances the social cost with the social benefit of interactive technologies. Prospect theory recommends enforcing interactive patents where it would promote an inventor's ability to commercialize her invention free from direct competition. Finally, rent dissipation theory suggests enforcing interactive patents if it will effectively reduce the dissipation of patent rents.Viewing interactive patent enforcement through the lens of these economic theories reveals how doctrinal tests for divided infringement may align with the economic goals of the patent system. Although it is likely that the doctrinal test for divided infringement will continue to evolve, start-ups and disruptive, hi-tech companies who own interactive patents should find some guidance in the notion that the economic underpinnings of the patent system support enforcement of their interactive inventions