Exploding the Supply Chain

This chapter describes the relationship between secure patent enforcement, the disaggregation of technology supply chains, and reduced entry barriers in three core segments of the modern innovation economy. The establishment of the Federal Circuit in 1982, coupled with the relaxation of antitrust restrictions on licensing starting in 1977, inaugurated a strong-IP regime that has enabled firms to mitigate the expropriation risk inherent to the transfer and exchange of informational assets. In the biotechnology market, secure patents have facilitated transactions between R&D-intensive start-ups and large pharmaceutical companies that specialize in the testing, production, and distribution functions required to reach market. In certain segments of the semiconductor market, secure patents have facilitated transactions between chip-design firms and “foundries” that specialize in chip production. In certain information-technology markets, secure patents have facilitated IP-licensing structures that promote informational dissemination among a broad population of producers and other intermediate users.