Patents as Escalators

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Amelia S. Rinehart · 14 Vand. J. Ent. & Tech. L. 81

Abstract

High technology companies commit time, effort, and resources to innovation. Over the course of a research and development project, an innovative company may face several sequential decisions regarding whether to continue to invest in the project and whether to commercialize the discoveries that have been made. Companies often seek patents early in the research and development process to receive the right to exclude others from practicing the invention. Given a current trend toward earlier and earlier patent filing, several scholars suggest that this strategy could leave many inventions underdeveloped; companies may treat patents like real options, deciding later where to place their resources to maximize their utility. This Article introduces the escalation of commitments, which is a behavioral phenomenon observed in decision making under uncertainty to the current trends in patent filing. The Article further discusses the ramifications of innovative companies’ escalating commitments to developing patented technology. Finally, the Article proposes that patents act to facilitate such commitment, in part because patents keep sunk costs relevant to the patent owner making decisions regarding further commitment. In this manner, patents may escalate the commercialization of patented technology.