In this chapter, we return to the American context in order to see how intellectual property develops from within a nationalizing state during the nineteenth century. We see the extent to which America's national legal foundations were, ironically, international and Roman. In writers of early U.S. legal treatises, we see an overt embrace of Roman law as a foundation for the commercial law of the new nation. We see the implications of this in the will theory of contracts and in franchising arrangements that lay the foundations for a telecommunications network, at first for telegraphs and later for telephones. Contracts become a new instrument of legal power, one that facilitates intentional strategy in the consolidation and deployment of unprecedented levels of social power, rooted in the zones of exclusivity enabled by intellectual property. In the Bell Telephone System, we see this consolidated social power at its apex. In the regulatory reactions to this level of social power, we see early foundations for the American administrative state.

One objective of the patent litigation system is to screen meritorious from non-meritorious patents and invalidate the latter. While much of this screening may occur at trial, some amount of targeting may take place at the time of the filing of the suit itself. In this chapter, we assess the targeting efficiency of the patent litigation system at this earlier filing stage. Should the system indeed screen at this stage, one would predict a higher likelihood of patent lawsuits among a set of patents with weaker underlying validity relative to a set of patents with stronger underlying validity. In prior work (Frakes and Wasserman, Review of Economics and Statistics, 2017), we found that as examiners were given less time to review applications, they granted patents at higher rates, with the resulting marginal patents exhibiting greater markers of invalidity and attracting more litigation. An implication of these findings is that patents with more questionable validity—due to the leniency of the examiner—are indeed more likely to wind up in litigation, a finding supportive of filing-stage screening of meritorious claims. Our analysis in this book chapter attempts to generalize these prior findings to sources of examiner leniency beyond time constraints. More broadly, we characterize an examiner’s leniency by their overall grant rate, taking advantage of the fact that applications are effectively randomized across examiners. Consistent with our prior findings, we find that lenient examiners are more likely, on average, to issue patents with markers suggestive of weaker underlying validity and that are more likely to attract litigation. Ultimately, our findings suggest that legally invalid patents issued by the U.S. Patent Office are substantially more likely to be the target of litigation relative to legally valid patents.