The economics of patents

You may have seen on the BBC’s Dragons’ Den that a common question addressed to an inventor is whether they have a patent on their product. Why is this important, and how does the granting of a patent affect consumers? James Rutt, of the Competition and Markets Authority (CMA) investigates

Bell fiercely protected his telephone patent

patents, monopoly, innovation, static and dynamic inefficiency

In 1876 Elisha Gray and Alexander Graham Bell were both working to develop a new form of telegraph that could transmit speech; in other words, a telephone. The two men had worked on their inventions for years and on the same day in February 1876 both men submitted patent applications. In one (possibly apocryphal) account of events, Bell’s lawyer first rushed into the patent office with Bell’s patent application. Then a few hours later, Gray’s lawyer hurried in clutching Gray’s application. The patent office awarded the patent to Bell who is now widely credited as the inventor of the telephone and Bell’s company (AT&T) is still one of the leading communication companies in the USA. Over the subsequent years there were around 600 challenges to Bell’s patent and he defended each one of them.