Mossoff (2011) - Rise And Fall Of The First American Patent Thicket

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Reference

• Mossoff, A. (2011), "Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s, The", Ariz. L. Rev., Vol.53, pp.165

@article{mossoff2011rise,
  title={Rise and Fall of the First American Patent Thicket: The Sewing Machine War of the 1850s, The},
  author={Mossoff, A.},
  journal={Ariz. L. Rev.},
  volume={53},
  pages={165},
  year={2011},
  abstract={When Michael Heller proposed that excessively fragmented property rights in land can frustrate its commercial development, patent scholars began debating whether Heller’s anticommons theory applies to property rights in inventions. Do patent thickets exist? The rise and fall of the first American patent thicket—the Sewing Machine War of the 1850s—confirms that patent thickets do exist and that they can frustrate commercial development of new products. But this historical patent thicket also challenges the widely held assumption that this is a modern problem arising from allegedly new issues in the patent system, such as incremental high-tech innovation and the impact of patent trolls? The Sewing Machine War exhibited all of these phenomena, proving that these are hoary issues in patent law. The denouement of this patent thicket in the Sewing Machine Combination of 1856, the first privately formed patent pool, further challenges the conventional wisdom that patent thickets are best solved through public-ordering regimes that limit property rights in patents. The invention and incredible commercial success of the sewing machine is a striking account of early American technological, commercial, and legal ingenuity, which heralds important empirical lessons for how patent thicket theory is understood and applied today.},
  discipline={Econ},
  research_type={Discussion},
  industry={Sewing},
  tags={Patent Pool},
  filename={Mossoff (2011) - Rise And Fall Of The First American Patent Thicket.pdf}
}

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Abstract

When Michael Heller proposed that excessively fragmented property rights in land can frustrate its commercial development, patent scholars began debating whether Heller’s anticommons theory applies to property rights in inventions. Do ?patent thickets? exist? The rise and fall of the first American patent thicket—the Sewing Machine War of the 1850s—confirms that patent thickets do exist and that they can frustrate commercial development of new products. But this historical patent thicket also challenges the widely held assumption that this is a modern problem arising from allegedly new issues in the patent system, such as incremental high-tech innovation and the impact of ?patent trolls.? The Sewing Machine War exhibited all of these phenomena, proving that these are hoary issues in patent law. The denouement of this patent thicket in the Sewing Machine Combination of 1856, the first privately formed patent pool, further challenges the conventional wisdom that patent thickets are best solved through public-ordering regimes that limit property rights in patents. The invention and incredible commercial success of the sewing machine is a striking account of early American technological, commercial, and legal ingenuity, which heralds important empirical lessons for how patent thicket theory is understood and applied today.

Review

Definition of patent thicket

A ‘patent thicket’ exists when too many patents covering individual elements of a commercial product are separately owned by different entities. This concept is not unique to patent law; it is based on Professor Michael Heller’s theory of the anticommons in real property, which arises when there is excessive fragmentation of ownership interest in a single parcel of land. According to economic theory, the problem of such excessive fragmentation of ownership interests is straightforward: It increases transaction costs, accentuates hold-out problems, and precipitates costly litigation, which prevents commercial development of the affected property."

Policy Discussion

Policy topic considered:

• The author conducts a case study of a patent thicket that (temporarily) prevented the commercial development of an important Industrial Revolution product, 'Sewing Machine War' of the 1850’s.
• The Sewing Machine Combination from 1856 to 1877 was the first patent pool in American history and ended the 'Sewing Maching War'.
• The patent pool served as a lightning rod for populist-style criticism of possible anti-trust consequences.

"What makes the sewing machine story so salient is that the Sewing Machine War comprised so many issues that are currently in play in modern patent policy debates, such as 'patent trolls'(i.e., non-practicing entities), the function of injunctions in patent litigation, hold-ups , and, of course, the existence of patent thickets."

Historical review:

Sewing technology in the 1750s-1850s was a patent thicket in which inventors had overlapping patent rights:

• A German mechanic developed and patented (in England) an eye-pointed needle in 1755.
• Another inventor was granted a patent for a banding machine that used and eye-pointed needle in 1807.
• A French tailor, Barthelemy Thimonnier invented an industrial-sized sewing machine in 1830, but Mr. Thimonnier’s shop was destroyed by Luddites.

• Commercialization of sewing machines involved patent litigation:
  • A succession of American inventors in the 1840s and 1850s succeeded in creating the first practical sewing machine and were granted patents on sewing machine or sewing machine components.
  • A 1843 patent granted to Elias Howe, Jr. incorporating three elements, an eye-pointed needle, a shuttle, the creation of a lockstitch.
  • American inventor Isaac Merritt Singer, with business partners George B. Zieber and Orson C. Phelps, began creating a sewing machine in September 1850. Singer’s machine was granted an improvement patent on pre-existing sewing machines patent in 1851.
  • Returning from abroad in 1849, Mr. Howe learned that sewing machines were available for sale to the American public and began the process, with the assistance of an investor to finance his patent infringement lawsuits as he was now destitute, of suing infringers of his patent for royalties.
  • By 1953, Howe had granted licenses to all except Mr. Singer. Mr. Singer and Mr. Howe continued litigation.
• In October 1856, litigation was resolved by the creation of patent pool the "Sewing Machine Combination" that held patents in a commerical trust that issued licenses in exchange for royalties and litigated as a group.

Social Welfare Consequences

• Unclear and depends on industry context.

"At a minimum, [the case study] serves as a cautionary tale against many foundational assumptions that dominate the current discourse concerning patent thickets, such as the nature of incremental innovation, the contextual nature of patent thickets, the extent to which patents thickets are solely a property problem, the role of non-practicing entities, and the justification for public-ordering versus private-ordering solutions.

Policy Advocated in Paper

"This [case study] challenges many assumptions in the patent thicket literature, such as that this is a relatively modern problem arising from modern changes in both patent law and technology. It also challenges the propensity within much of the literature to favor public-ordering regimes as solutions to patent thickets, such as new regulations, legislation, or court decisions."

• The author disagrees that patent thickets are primarily a modern problem having to do with recent changes in technology and law.
  • He further contends that the most recent studies published on the topic are inconclusive because they focus on technology that is too cutting-edge and therefore represents a "moving empirical target."
• The author views patent thickets as a property problem that may be addressed in a number of ways.
  • The Patent Reform Act of 1856 did not pass and was not necessary to resolve the Sewing Machine War.
  • In this case, private actors resolved differences acting in their own benefits without eliminating a patent holder’s ability to get injunctions, royalties, or impose restraints.