Debunking the Myth that Patents Create a Monopoly

By Gene Quinn
March 6, 2010

Many inventors operate under the misunderstanding that getting a patent is like owning Boardwalk and Park Place in the popular board game “Monopoly.” Unfortunately, turning a patent grant into cash is much more complicated than simply placing hotels on Boardwalk and Park Place.  Those who are against patents always seem to argue that a patent is a monopoly, or at least use those terms interchangeably.  Don’t be fooled into thinking that a patent is a monopoly.  Simply obtaining a patent will not result in the arrival of a money truck to your doorstep.

Just because an inventor has been granted a patent does not mean that there will be a market for the patent product, and without a market there can be no monopoly. The patent only gives the patent owner the right to exclude others from making, using, selling and importing. A patent carries with it no expectation for market success. Granted, if the product does have a market a patent can be a significant barrier to entry that insulates the patent owner from competition, but a patent in and of itself does not guarantee business success.

A patent only dangles the opportunity to achieve monopoly profits. This is due to the exclusive nature of the right and the ability to be the only player in the market. Again, a market is necessary, which means a product that people are willing to pay for is a pre-requisite. In the absence of a product that people want, and the business acumen to capitalize on a market opportunity, a patent will not result in riches.


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Chief Judge Markey, the first Chief Judge of the Court of Appeals for the Federal Circuit, time and time again reprimanded scholars, attorneys and fellow judges for characterizing a patent grant as a conference of a monopoly. In Carl Schenck, A.G. v. Nortron Corp., 713 F.2d, 782, 786 n. 3 (Fed. Cir. 1983), Judge Markey stated:

Nortron begins its file wrapper estoppel argument with “Patents are an exception to the general rule against monopolies…”. A patent, under the statute, is property. 35 U.S.C. S 261. Nowhere in any statute is a patent described as a monopoly. The patent right is but the right to exclude others, the very definition of “property.” That the property right represented by a patent, like other property rights, may be used in a scheme violative of antitrust laws creates no “conflict” between laws establishing any of those property rights and the antitrust laws. The antitrust laws, enacted long after the original patent laws, deal with appropriation of what should belong to others. A valid patent gives the public what it did not earlier have. Patents are valid or invalid under the statute, 35 U.S.C. It is but an obfuscation to refer to a patent as “the patent monopoly” or to describe a patent as an “exception to the general rule against monopolies.” That description, moreover, is irrelevant when considering patent questions, including the question of estoppel predicated on prosecution history.

See also American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1367 (Fed.Cir.) (“The patent system, which antedated the Sherman Act by a century, is not an ‘exception’ to the antitrust laws, and patent rights are not legal monopolies in the antitrust sense of that word.”), cert. denied, 469 U.S. 821, 105 S.Ct. 95, 83 L.Ed.2d 41 (1984); Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1160 n. 8 (6th Cir.1978) (“The loose application of the pejorative term ‘monopoly,’ to the property right of exclusion represented by a patent, can be misleading. Unchecked it can destroy the constitutional and statutory scheme reflected in the patent system.”).

Despite what you may have heard to the contrary, virtually no patent will lock up a market and hold others within the market hostage.  Certainly there can be foundational technologies that are of extreme importance, but those types of inventions are rare.  Most inventions are improvements or incremental advances of different magnitudes.  See Understanding Improvement Patents & Inventions.

It is also important for inventors to understand that patents are fragile rights.  When you define your invention you are essentially placing your stakes in the ground and defining the exclusive rights you now have.  It is hard to define your rights in the first instance with as much specificity and detail as required, while at the same time anticipating what others will do and how they might attempt to get around your rights.  Like most things in life, it is harder to do in the first instance than it is to get around or undo later.  Thus, when you have an innovation and you are making money basic laws of economics suggest that there will be others who will seek to enter your marketplace and compete.  It is that simple.

A patent does not guarantee you the right to exclude others from a market.  A patent provides you the right to prevent others from making, selling, offering for sale or importing an invention that is identical to what you have defined in the claims of your patent.  For that reason when you find an innovation that is lucrative you should not think in terms of getting a single patent, but if there is money to be made others will want into your market so you must think about continually innovating, pushing out the envelope of protection and obtaining more patents.

I tell inventors all the time to model themselves after success, not after failure.  One company that every inventor should learn more about is Apple.  See The Apple Way: Repeated Innovation + Patent = Domination. While they have made some bad business mistakes in the past, they are a true innovator and when they come across an innovation they patent it and continue to advance innovation and push out the envelope of exclusive protection.  This is an excellent model, and one that inventors can learn from.

As with most endeavors, there needs to be an appropriate balance.  I am a fan of provisional patent applications because if they are done appropriately they can be an excellent tool for incrementally going down the road toward obtaining a patent.  They can be economically efficient and in fact far cheaper than a nonprovisional patent application.  They can also be used to lock in whatever rights you have with respect to whatever you are in possession of in terms of innovation right now.  Waiting to perfect the invention and then file a patent application puts you at risk.  Filing early, obtaining some rights and advancing as long as the project continues to make economic sense can be an excellent strategy for independent inventors and small businesses alike.

The moral of the story is this: you need to approach inventing as a business if you are going to make any money doing it.  As you proceed to achieve this goal always keep in mind that if it sounds too good to be true it probably is too good to be true.  The thought that a single patent can lead to a monopoly that unfairly or improperly holds an entire market hostage may sound like a good argument for those who hate patents, and it might sound very appealing for those who are inventors, but the truth is that like so many other things in the innovation space it oversimplifies reality to the point that it is simply incorrect.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 16 Comments comments.

  1. Loof March 6, 2010 3:43 pm

    Huh. Aren’t you failing a little at playing with words here? A monopoly on a non-existant market is still a monopoly.

  2. Gene Quinn March 6, 2010 3:48 pm

    Loof-

    Actually it is you who are failing to pay attention I’m afraid. Without a market there cannot be a monopoly. One definition of monopoly defines the term as:

    “An economic advantage held by one or more persons or companies deriving from the exclusive power to carry on a particular business or trade or to manufacture and sell a particular item, thereby suppressing competition and allowing such persons or companies to raise the price of a product or service substantially above the price that would be established by a free market.”

    See http://legal-dictionary.thefreedictionary.com/monopoly

    So you cannot have an advantage if there is no market. If there is no market there will be no advantage because there is no interest. Simply stated, a monopoly exists when there is a dominant market player that has the ability to set prices above competitive level. So if there is no market there will be no super competitive prices, and hence no monopoly.

    -Gene

  3. Loof March 6, 2010 5:35 pm

    Alright, let’s pretend i agree with this for the sake of the argument. The patent is still a free ticket for a monopoly. See, all there is to do is to create the market (if it doesn’t exist already) and, with the patent(s), you can stop others from playing in your field. The patent is a preemptive strike to get rid of potential competitors.

  4. Gene Quinn March 6, 2010 8:24 pm

    Loof-

    It really is not fair to say that a patent is “a free ticket for a monopoly.” Patents are anything but free. Obviously, I will concede the point where I believe you are headed which is that a patent can lead to a monopoly. That is for certain, but not true simply as a result of getting a patent. There are many other reasons for that as well. In many cases the rights obtained are so narrow such that they are quite useless, and in order for a patent to exclude the claims have to be valid, which I know is presumed but not always the case in reality.

    I also think you are way over simplifying how difficult it is to create a market. It is anything but easy to create a market and numerous first generation inventions or revolutionary inventions don’t go as far as they could and should because of the time and expense of creating a market. There is a reason why many, if not most, inventions are improvements. If there is already a market and you can offer efficiencies it is easier to get customers and make money.

    I wouldn’t say a patent is a preemptive strike either. In many, if not most, cases patents are obtained for defensive purposes. Of course, even defensive portfolios can be used offensively if there is encroachment. Witness Apple’s recent lawsuit to defend its iPhone turf.

    -Gene

  5. James March 6, 2010 10:12 pm

    Another important point is that the patent doesn’t guarantee anything. If the other party does not agree to pay royalties or quit practicing the patented technology, then you will be forced to sue them to enforce your rights. Patent infringement suits are very very expensive (millions of dollars for each party). A patent is fairly useless if you cannot afford to enforce your rights or you cannot find a backer to finance your patent infringement suit.

  6. Gene Quinn March 7, 2010 10:37 am

    James-

    Very true. One thing that has started to equalize the playing field a little at least is the increasing availability of patent litigators who undertake representation on a contingency basis, which means they don’t get paid unless they win or there is a settlement. In this situation there still needs to be enough money on the line to entice contingency representation, but such representation is far more available than it used to be.

    If anyone is looking for contingency representation I recommend at least contacting Tara Williams. Her website is at:

    a href=”http://www.ip-contingency-lawyer.com/tara-williams-intellectual-property-infringement-attorney” target=”_blank”>http://www.ip-contingency-lawyer.com/tara-williams-intellectual-property-infringement-attorney.

    -Gene

  7. mike foley March 7, 2010 10:43 am

    I am an inventor, but ultimately I am just a guy trying to bring innovation to the hand tool market. I know that you have “passed muster” with most of the folks in the invention and patent business, so please give me a couple of invention marketing conferences or tradeshows you think are relevant and most of all, trustworthy. I think that in times of economic downturn, America’s creativity tends to explode. I just want to know which event I can go to and not be surrounded by scammers.

  8. Gene Quinn March 7, 2010 11:04 am

    Mike-

    The first thing I want to tell you is that at any inventor show you need to be careful. There are good shows run by good people, and there are good shows run by those who have checkered reputations. The invention community has many with good reputations and many with bad reputations, and at shows they are both likely to be there in the crowd. So whatever you do keep your senses about you and if it sounds too good to be true it probably is.

    Having said this, here are some shows I would consider:

    Minnesota Inventors Congress — June 11 & 12, 2010
    http://www.minnesotainventorscongress.org/InventionIdeaShow/tabid/82/Default.aspx

    INPEX — June 16-18, 2010 in Pittsburgh
    http://www.inpex.com/
    NOTE: This show is run by InventHelp, but from those I trust I hear it is an excellent show and deals do get done because it is one of the largest shows and attracts serious buyers. Whatever your opinion of InventHelp is you should not, in my opinion, shy away from this show. Like any other show you just need to go in with a plan and be open, but cautious, as you should with any business dealing.

    Lambert & Lambert also has a comprehensive list of trade shows broken down by subject matter at:

    http://www.lambertinvent.com/tradeshows.php

    I cannot vouch for these shows, but I do have a high opinion of Lambert & Lambert. I recommend that inventors give them a call to at least hear what they have to say. They are quite selective with respect to who they work with because they work on a contingency basis, and they focus on some stuff and not so much on others. It is worth a call though.

    I hope this helps.

    -Gene

  9. Ron Hilton March 7, 2010 4:14 pm

    It is quite true that most inventions are incremental improvements on existing technology. However that does not free them from the potential for monopolistic abuse. By refusing to license their base technology to the inventor of an improvement upon that technology, a monopolist can defeat the competitive threat that otherwise might be posed by an improved version of their product. Or if the inventor has an obligation to assign the patent to the monopolist (i.e. if the inventor is an employee of the monopolist), the monopolist has no obligation to actually commercialize that improvement, but can choose to sit on the invention and actually retard innovation and progress in the field, quite opposite to the original intent of the patent system. Since they already have a monopoly, there is little incentive to invest in incremental improvements which may only add to the product cost, without increasing product pricing which is already at monopoly levels. Let me add that I am speaking from personal sad experience, and I don’t think my experience is unique among inventors. However, I don’t mean it as an indictment of the patent system. The real problem is the high legal hurdles that exist for antitrust enforcement.

  10. David Koepsell March 8, 2010 5:18 am

    sophism has found a home outside the academy, I see.

  11. Ron Hilton March 8, 2010 9:47 am

    No, this is very real-world. I founded Platform Solutions, Inc. (PSI) in 1999 as an offshoot of Amdahl Corporation, a multi-billion dollar company which had successfully competed against IBM in the mainframe business for decades. Initially, IBM agreed to license it’s patents and other IP to PSI on the same terms as Amdahl. But in 2001 Amdahl and Hitachi both withdrew from the mainframe business (precipitated to some extent by the termination of the 40 year antitrust IBM consent decree) and IBM found itself with a near-monopoly again, except for PSI. Long story short, they reversed their stance on licensing and sued PSI for patent infringement in 2006, and eventually bought the company out 2008 (I left in 2007) and buried its competitive technology. So please don’t lecture me about sophistry.

  12. mike foley March 8, 2010 9:56 am

    Here’s another question: (sorry to be off topic, but I am new) I have people asking me about the prior art on my nail pullers and as I have been filing for almost 8 years, I am most of the prior art on my newest allowed claims. Is this good or bad? Am I building strength? Or not?

  13. pop March 8, 2010 2:36 pm

    -Gene

    I see your point, however, I agree with the other commenters that you are just playing word games. You found a dictionary that has a definition of monopoly that you like, but a glancing look at any more mainstream dictionary will provide a definition that defies you. The dictionary argument is not a good defense in my book.

    Most people use the word monopoly to mean that a person or entity has exclusive control. If I owned 51% of some companies corporate stock, it wouldn’t be unreasonable to say “he has a monopoly of shares”, because it correctly identifies that I would have exclusive control over the company. To tack on “and it has to make money too” is just silly. No market = no monopoly = no sense.

    The point you were making, as I understand it, is that a patent probably won’t cover an entire market or product and that it won’t guarantee a return on investment or a profit, and I agree with that. To say however that the person doesn’t have a monopoly is just ridiculous.

  14. Gene Quinn March 9, 2010 10:41 am

    POP-

    No word games at all. The trouble is that folks don’t like what monopoly means and would prefer to simply berate patents and use sloppy logic to do so.

    I agree with you though when you say: “Most people use the word monopoly to mean that a person or entity has exclusive control.” That is the whole point, and is in fact what monopoly means. The trouble is that this is not what a patent grants, whether anyone wants to acknowledge it or not is inconsequential. A patent simply does not grant an entity exclusive control over the market, and a patent doesn’t grant an entity exclusive control over an invention. If you patent something and I improve it then I can prevent you from using the improvement. If you invent A that does Z that doesn’t mean you can prevent me from inventing B that also does Z. This is real, not an imaginary difference or based on word games. It is reality, and those who don’t like patents don’t seem to want to be bothered with the reality, which is unfortunate. Pushing a position that has no merit as a result of ideology means there is an agenda, at least in my opinion.

    As far as the definition of “monopoly” go ahead an look in any dictionary you want and the definition will be the same. It is not the right term to use and excuse me for pointing out that the logic and language of those in the anti-patent movement is incorrect.

    I agree with what you say in the last paragraph of your comment, except the last sentence. It is not ridiculous at all to say a person with a patent does not have a monopoly. That is reality whether you want to except it or not. The trouble is what a patent truly gives, which is exclusive rights for a limited time, won’t sway public opinion and rally to the anti-patent side. That is because the public at large agrees that inventors should be rewarded with exclusive rights for a limited time when they make an invention. Because overwhelming public sentiment is what it is the anti-patent movement has to distort the debate and use the term “monopoly,” knowing the public does not like monopolies. The intellectual dishonesty in the name of forwarding an agenda is sad, although unfortunately not uncommon.

    -Gene

  15. american biologics July 27, 2010 8:26 pm

    i basically grew up playing monopoly. who ever invented that game must be making a lot of money right now because every year or so they come up with different themes and people are actually buying them and collecting them. number one board game i would say.