Cato Institute Regulation Magazine: The $84 Billion Patent Litigation Fallacy, by Ron D. Katznelson
This post originally appeared in the Cato Institute’s Regulation magazine on April 19, 2016.
In a seductively plausible narrative disseminated a century ago, the national Advisory Committee for Aeronautics, a U.S. government agency that then oversaw American aviation, accused the Wright Company (yes, those Wrights) of abusively enforcing lawfully obtained patents it did not itself practice. Beginning before the United States entered World War i, U.S. navy and
Army officials alleged without evidence that the Wright brothers’ patent suppressed the development of the aviation industry,
persuading Congress to authorize the condemnation of such private property (aviation patents) without fair compensation to the Wright patent holders or their shareholders.
Because the government was essentially the only buyer of aircraft, it was the infringer intent on suppressing royalty payments. This led to its coercion of property owners into pooling their patented intellectual property at depressed royalty rates, devaluing the Wrights’ aviation patents substantially and rendering others practically worthless.