State Patent Laws in the Age of Laissez Faire

0045-0114_HRDY_081313_WEB (DO NOT DELETE) 8/13/2013 4:53 PM STATE PATENT LAWS IN THE AGE OF LAISSEZ FAIRE Camilla A. Hrdy † ABSTRACT This Article brings to light the heretofore unstudied views of esteemed nineteenth century jurists, including Chief Justice of the New York Supreme Court James Kent (1763– 1847), that states have concurrent constitutional authority to grant their own patents alongside Congress in order to stimulate innovation and economic development in their own territories. Based on arguments surrounding the constitutional validity of New York’s infamous steamboat monopoly, this Article reveals that in the height of America’s supposed commitment to laissez faire economics, concurrent state patent powers were justified by a fundamental concern that Congress’s new and uniquely “hands-off ” patent system was not a sufficient replacement for the active patent policies of state and colonial governments prior to adoption of the Constitution. Therefore, in the tradition of Alexander Hamilton—who tempered his vision of a strong central government with a recognition of the importance of autonomous state policymaking and his vision of a vibrant free market with a recognition that targeted government incentives are sometimes necessary to stimulate investment in beneficial activities—state patents were seen as an important policy tool for encouraging the private sector to invest in developing costly technology of unproven value that states deemed worthy of support. © 2013 Camilla A. Hrdy. † Visiting Scholar at the Berkeley Center for Law and Technology at University of California Berkeley School of Law and Postdoctoral Fellow at the Information Society Project at Yale Law School. J.D., University of California Berkeley School of Law; M.Phil. in History and Philosophy of Science, University of Cambridge; B.A., Harvard University. I am immensely grateful to Robert Merges and John Yoo, who were essential sources of guidance and encouragement throughout this project. Thanks also to Mario Biagioli, Daniel Kazhdan, Elizabeth Perlman, Zorina Khan, Will Baude, Bryan Choi, Kathy Abrams, and the members of Berkeley Law’s legal scholarship seminar, 2011–12; David Rosen, Mark Langer, and the editors of the Berkeley Technology Law Journal; and Nilgun Gokur, Charlie Wyzanski, Marc Esserman, Ursula DeYoung, and my family. This Article is dedicated to the memory of Edward C. Walterscheid. 0045-0114_HRDY_081313_WEB (DO NOT DELETE) 46 BERKELEY TECHNOLOGY LAW JOURNAL 8/13/2013 4:53 PM [Vol. 28:45 TABLE OF CONTENTS I. INTRODUCTION ............................................................................................... 47 A. B. C. II. STATE AND COLONIAL PATENT LAWS............................................... 58 A. B. III. B. B. UNCOVERING A STATE PATENT AT THE HEART OF THE STEAMBOAT MONOPOLY ........................................................................... 78 THE FIRST COMMERCIAL STEAMBOAT ENTERPRISE IN AMERICA ........................................................................................................ 79 JUSTICE JAMES KENT’S CONCURRENT STATE PATENT SYSTEM .............................................................................................. 80 A. B. C. VI. “THE STATES CANNOT SEPARATELY MAKE EFFECTUAL PROVISION . . . .” .......................................................................................... 67 THE EVIDENCE FOR STATES’ REMAINING PATENT POWERS ............ 70 1. The Text of the IP Clause..................................................................... 71 2. The Patent Act’s “Relinquishment” Provision ....................................... 72 3. The Decision to Limit U.S. Patents to Universally Novel Inventions.............................................................................................. 74 THE LAST STATE PATENT .......................................................................... 76 A. V. LESS EMPHASIS ON NOVELTY; MORE EMPHASIS ON RESULTS .......... 60 LIMITING PRINCIPLES ON COLONIAL AND STATE PATENT LAWS ............................................................................................................... 64 THE INCOMPLETE TRANSITION TO A NATIONAL PATENT SYSTEM .............................................................................................. 67 A. IV. A WORLD WITHOUT STATE PATENT LAWS ........................................... 47 AN UNEXPECTED APPEAL FOR STATE PATENTS IN THE AGE OF LAISSEZ FAIRE ....................................................................................... 52 THE STRUCTURE OF THIS ARTICLE .......................................................... 55 CHANCELLOR LANSING’S DISCOMFORT WITH STATESANCTIONED MONOPOLIES ...................................................................... 80 THE NEW YORK SUPREME COURT’S ENDORSEMENT OF STATE PATENT POWERS ............................................................................. 81 STATE PATENT LAWS IN THE WAKE OF GIBBONS................................. 88 JUSTIFYING CONCURRENT STATE PATENT POWERS .............. 93 A. B. THE WEAKNESS OF U.S. PATENTS IN THE EARLY NINETEENTH CENTURY............................................................................. 94 U.S. PATENT LAW LEFT MAJOR GAPS IN AMERICAN INNOVATION POLICY ................................................................................. 95 1. No Concern for the Social Utility of the Subject Matter ......................... 95 2. No U.S. Patents for Previously Known or Used Technology ................... 96 0045-0114_HRDY_081313_WEB (DO NOT DELETE) 2013] STATE PATENT LAWS C. D. 8/13/2013 4:53 PM 47 3. No Assurance of Local Working of Inventions ...................................... 98 JUSTIFYING CONCURRENT STATE PATENT POWER IN THE AGE OF LAISSEZ FAIRE............................................................................100 NEW YORK’S STEAMBOAT PATENT AS A MARKET CORRECTIVE ...............................................................................................104 VII. CONCLUSION ...................................................................................................108 I. INTRODUCTION A. A WORLD WITHOUT STATE PATENT LAWS In theory, by granting inventors exclusive rights to their original inventions for a limited period, patents give the private sector a needed incentive to invest in innovation and encourage public disclosure of previously unknown technological know-how.1 Today patent law is purely a federal creature. Article I, Section 8, Clause 8 of the Constitution (“the IP Clause”) gives Congress power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”2 Under the Patent Act, Congress determines the terms and conditions under which inventors may apply for federal patents (“U.S. patents”).3 A single agency, the United States Patent and Trademark Office (...truncated)