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Wake Forest Journal of Business and Intellectual Property Law WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 16 NUMBER 2 WINTER 2016 COULD A LACK OF STRONG PATENTS SPUR THE NEXT GLOBAL MARKET COLLAPSE? Nicholas Tsui 182 AN ECONOMIC ANALYSIS OF MARKET FAILURES IN COPYRIGHT LAW: IATROGENESIS AND THE FAIR USE DOCTRINE Colin Kennedy 209 THE NEED FOR COMPULSORY LICENSING OF ANTIRETROVIRAL DRUGS: THE INDIAN PERSPECTIVE Ambika Sahai & Kruthika N. S. 241 USEDSOFT AND ITS AFTERMATH: THE RESALE OF DIGITAL CONTENT IN THE EUROPEAN UNION Sven Schonhofen 262 ABOUT THE JOURNAL The WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW is a student organization sponsored by Wake Forest University School of Law dedicated to the examination of intellectual property in the legal context. Originally established as the Wake Forest Intellectual Property Law Journal in 2001, the new focus and form of the Journal, adopted in 2010, provides a forum for the exploration of business law and intellectual property issues generally, as well as the points of intersection between the two, primarily through the publication of legal scholarship. The Journal publishes four print issues annually. Additionally, the Journal sponsors an annual symposium dedicated to the implications of intellectual property law in a specific context. In 2009, the Journal launched an academic blog for the advancement of professional discourse on relevant issues, with content generated by both staff members and practitioners, which is open to comment from the legal community. The Journal’s student staff members are selected for membership based upon academic achievement, performance in an annual writing competition, or extensive experience in the field of intellectual property or business. The Journal invites the submission of legal scholarship in the form of articles, notes, comments, and empirical studies for publication in the Journal’s published print issues. Submissions are reviewed by the Manuscripts Editor, and decisions to extend offers of publication are made by the Board of Editors in conjunction with the Board of Advisors and the Faculty Advisors. The Board of Editors works closely and collaboratively with authors to prepare pieces for publication. Manuscript submissions should be accompanied by a cover letter and curriculum vitae, and may be sent electronically to [email protected] or by mail to: Manuscripts Editor Wake Forest Journal of Business and Intellectual Property Law Wake Forest University School of Law P.O. Box 7206 Reynolda Station Winston-Salem, North Carolina 27109 COPYRIGHT © 2016 WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW ISSN 2164-6937 (Print) ISSN 2164-6945 (Online) BOARD OF ADVISORS DANNY M. AWDEH BARBARA LENTZ Finnegan Henderson Farabow Professor, Wake Forest Garrett & Dunner LLP University School of Law Washington, DC Winston-Salem, North Carolina CHARLES W. CALKINS JAMES L. LESTER Kilpatrick Townsend & Stockton MacCord Mason PLLC LLP Greensboro, North Carolina Winston-Salem, North Carolina JUSTIN R. NIFONG KENNETH P. CARLSON Olive Law Group Constangy, Brooks & Smith, LLP Cary, North Carolina Winston-Salem, North Carolina MICHAEL S. MIRELES TRIP COYNE Professor, University of the Williams Mullen Pacific, McGeorge School of Law Wilmington, North Carolina Sacramento, California RODRICK J. ENNS ALAN PALMITER Enns & Archer LLP Professor, Wake Forest Winston-Salem, North Carolina University School of Law Winston-Salem, North Carolina EDWARD R. ERGENZINGER, JR., PH.D. ABBY PERDUE Ward & Smith, P.A. Associate Professor, Wake Forest University School of Law Raleigh, North Carolina Winston-Salem, North Carolina JASON D. GARDNER Kilpatrick Townsend & Stockton COE W. RAMSEY LLP Brooks Pierce Atlanta, Georgia Raleigh, North Carolina STEVEN GARDNER T. ROBERT REHM, JR. Kilpatrick Townsend & Stockton, Smith, Anderson, Blount, LLP Dorsett, Mitchell, & Jernigan, Winston-Salem, North Carolina LLP ROB HUNTER Raleigh, North Carolina The Clearing House Payments SIMONE ROSE Company, LLC Professor, Wake Forest Winston-Salem, North Carolina University School of Law Winston-Salem, North Carolina Editor-in-Chief TIMOTHY M. MCLISTER Managing Editor ELI M. MARGER Marketing Editor Manuscripts Editor JOSEPH GREENER ANASTASIA E. FANNING Symposium Editor Executive Articles JAIME C. GARCIA Editors CAMERON J. BROWN Development Editor JANE C. GARRITY KATHERINE S. OTT COLIN T. KENNEDY Senior Notes and Comments Editor Articles Editors MAGGIE H. DICKENS BRITTANY P. COLTON Notes and Comments Editors SARAH A. GALLAS EMILY G. MORRIS KAYLA M. FREDERICKSON EMILY A. SINGER S. BLAYDES MOORE Editorial Staff ANDREW M. ADAMS CHRISTIAN C. DORISMOND ALEC C. ROBERSON ISSAC B. ALLMAN DANIEL P. GALYON ELIZABETH RUOCCO MITCHELL H. BLANKENSHIP CALEB J. HOLLOWAY RACHEL M. SHIELDS ALEXANDRA C. BRAVERMAN TYLER S. HOOD JONATHAN D. SILVER KEES C. BURNS AFZAL KARIM TALIS TREVINO BRANDY L. DAVIS JAMES C. WYATT Staff Members RYAN BOWERSOX THOMAS M. GAFFNEY NICOLE REGNA CHRIS CHOE LAUREN HENDERSON SARAH REMES AMANDA MICHELLE BRAHM MATTHEW KERSCHNER ZACHARY RHINES LAURA BROWDER LUKE E. KRAUS DIANNA SHINN JENNA B. COOGLE JAMES LATHROP MATTHEW W. SILVERSTEIN ETHAN CLARK AMELIA E. LOWE DANA SISK MARIA COLLINS DRAKE MASON DAVID A. SWENTON CANDICE A. DIAH MOLLY MCCARTNEY CARA VAN DORN KELLY DONIGAN RACHEL OPLINGER KAITLIN G. WESTBROOK LAUREN N. FREEDMAN MOLLY D. PEARCE SARAH WESLEY WHEATON Faculty Advisors BARBARA R. LENTZ ALAN R. PALMITER ABBY PERDUE SIMONE A. ROSE OMARI S. SIMMONS WAKE FOREST JOURNAL OF BUSINESS AND INTELLECTUAL PROPERTY LAW VOLUME 16 WINTER 2016 NUMBER 2 COULD A LACK OF STRONG PATENTS SPUR THE NEXT GLOBAL MARKET COLLAPSE? Nicholas Tsui† I. INTRODUCTION ............................................................. 184 II. FINANCIAL INDUSTRY BENEFITS FROM MARKET RESTRAINTS .................................................................... 185 III. PATENTS ARE BUYER-SIDE MARKET RESTRAINTS 190 IV. AN EMPIRICAL LOOK AT PATENTS IN REGULATING THE COMMERCIALIZATION OF FINANCIAL INNOVATION ................................................ 195 A. METHODOLOGY ........................................................ 196 B. FINANCE PATENTS DURING THE GLOBAL FINANCIAL MELTDOWN ............................................. 196 V. CONCLUSION ............................................................... 205 † Associate in the Intellectual Property Litigation Group at Alston & Bird LLP in the Atlanta office ([email protected]); J.D. from Stanford University, a Ph.D. from MIT, and a B.S.E. from the University of Pennsylvania. I would like to thank Mark Lemley and Shawn Miller at Stanford Law School for each's review and support during the writing of this manuscript. 2016] COULD A LACK OF STRONG PATENTS 183 SPUR A GLOBAL MARKET COLLAPSE? ABSTRACT The purpose of the patent is to encourage potential inventors to undergo the risky venture of innovation. Since an issued patent then stands in the way of competition and follow-on innovation, it is generally thought desirable only to grant patents for inventions that would not otherwise occur without the patent incentive. Professor Mark Lemley once explained that "if we do not need patents to encourage new inventions, we certainly do not want to grant them in an effort to regulate the use of those inventions in the marketplace." However, this paper is the first to suggest that that the traditionally negative consequences of patents may actually promote innovation in long term. This paper questions the conventional risk-seeking approach that favors the unbridled commercialization of all new inventions. Instead, it suggests that it may actually be desirable for patents to regulate the diffusion of new inventions into the marketplace. This paper focuses on how, in the lead-up to the global financial crisis in 2008, Congress, the courts, and the U.S. Patent and Trademark Office all supported removing any patent barriers to the widespread use and commercialization of financial innovation. The uninhibited spread of high-risk financial innovations went on to spur global economic crisis. This may have been an instance where the traditionally negative consequences of patent holdup, stifling litigation, and limited commercialization of innovation would have been keenly beneficial –– not only in the short term, but also in the long term and with effects across many industries. Strong patents may have been able to contain the use of high-risk financial innovation and, in turn, isolate the global financial crisis to the bankruptcy of just a few firms. This would have had profound effects on countless other industries that were hampered by the financial crisis. While industry-specific regulations have since been enacted to reduce the possibility of repeating past mistakes, patents in the area of financial and business innovation are still highly disfavored. And while industry-specific regulations tend to focus on past problems, patents tend to focus on future problems. This paper suggests that patents may provide a valuable mechanism for market regulation. A lack of strong patents could spur the next global market collapse. 184 WAKE FOREST J. [VOL. 16 BUS. & INTELL. PROP. L. I. INTRODUCTION Patents are traditionally viewed as monopolistic, anti-competitive market restraints that are an acceptable tradeoff to achieve greater incentives to innovate.1 The price of that tradeoff is that, after the innovation has been achieved, commercialization of that innovation as well as follow-on innovation may be slowed.2 This balance is important because the purpose of patents is to “Promote the Progress
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