Originally from Dispute Resolution Journal

Someone once said, "When there is a rift in the lute, the lawyers widen the rift and steal the loot." Another bit of folk wisdom observes that "When there is one lawyer in town, he subsists. When there are two, they prosper." Lawyers dismiss such comments as ravings of loons and probably louts. These remarks disturb lawyers because they are humorous only to the extent that the listener believes that a lawyer's economic interests are inconsistent with efficient resolution of disputes. Section 294 of the Patent Act provides a new tool to prove that belief wrong.

On August 27, 1982, President Reagan signed a bill and said that this will not only improve the patent system and encourage innovation, but will help relieve the burden on the Federal courts. Development of new technology is a vital ingredient in my Administration's plan for economic recovery. This measure is a significant step in this process. . . .''

The "significant step" was, in part. Section 294 of the Patent Act, which became effective on February 27, 1983. Section 294 has no predecessor in any prior patent legislation. This section was proposed in about 1981 by a few lawyers, including, importantly, Harry F. Manbeck, Jr., of General Electric. The bill was supported by Gerald Mossinghoff, then Commissioner of Patents and Trademarks.

Section 294 of the Patent Act seeks to increase the economic value of a patent and, therefore, the rate of return on investment in patentable Innovations. Tbe value of a patent is equal to the present value of income from its exploitation minus the costs of acquisition and policing against infringement. Minimizing these transaction costs benefits everyone excepi patent infringers and fickle licensees.