When you think of the American patent system, do you think of the early republic’s land grant system enabling settlers to buy and improve acreage for agriculture? Robert Merges thinks you should. A law professor, co-founder, and co-director of the University of California Berkeley Center for Law & Technology, he has written a wide-ranging history of American economic and industrial development from 1790 to the present from the perspective of “the Lego of the entitlement world,” patents (p. 495).

Patents were small grants of government power to individuals to create, improve, and implement new inventions as part of broader efforts to develop the economy and alleviate labor shortages by a democratic, low-cost, and decentralized property strategy backed up by federal courts. Patents became an essential, never static component of the American economy, aiding the development and diffusion of new technologies by providing their owners (or leasers) with specific property rights enabling “a wide and full scope of control over the uses—known and unknown; present and future—of an asset” (p. 484).

The major challenge snaking through these 496 pages was rewarding innovation and invention while preventing rent-seeking and overreaching. Perhaps Merges’s most important theme is the “persistence and pervasiveness of adaptive legal change” (p. 15) via judicial decisions, professional development of patent personnel, rare but important legislative action, and the evolution in employing patents to encourage economic development, new firm entry, and small-firm survival and discourage rent-seeking.

Major milestones include laws setting federal policy starting in 1790 and 1793 and continuing through the 2011 America Invents Act as well as judicial rulings. Some turning points in an industry’s development pivoted on a legal case about a key patent, such as the narrow interpretation of the Seldon patent which gave Henry Ford the opportunity to plow forward in the automobile industry (pp. 318–319).

Patents proved flexible and customizable, whether by subdividing their rights by geographic and ownership shares, especially in the early nineteenth century, becoming more important in portfolios by the late nineteenth century as inventions became more complex and corporate research and development (R&D) laboratories reduced dependence on “outside” inventors, and attracting and repelling patent trolls in the late twentieth century. The shift of importance from individual patents to portfolios of patents in the late nineteenth century reflected the changing realities of more complex inventions in concept, financing, manufacturing, distribution, and consumption.

Portfolios promoted market efficiency by enabling firms to put distinct, related sets of assets into sellable or rentable bundles, which became bargaining chips in consolidation, expansion, cross-licensing, secondary patents, and patent trolling. The invention of invention—centralized corporate R&D laboratories—further encouraged portfolio development while reducing reliance on independent inventors. Patents were not inherently biased toward corporate bigness; indeed, they helped small firms, especially startups, gain footholds in competitive markets (for example, the Sperry gyroscopic compass in navigation).

Working within the patent system, however, often generated high legal transaction costs. Much of this legal action occurred in a shadow market of private licensing of patent rights with most infringement disputes settled pre-court. Nonetheless, legal processes were expensive. Reducing such transaction costs in patent-intensive fields often occurred via patent pools, cross-licenses, and waivers.

Acknowledged but tertiary to this history were the obstacles facing women and racial minorities to become patent holders. Noteworthy also is Merges’s admiration for the community of professionalized patent participants—administrators, lawyers, examiners, and judges. Richly annotated with 1,383 footnotes, often with extensive citations and quotations that could become arguments or books in themselves, as well as previous work by Zorina Khan, Petra Moser, and many others, this history concludes the evolution of the American patent system “looks like one continuous episode of expansion and contraction, invention and opportunism, progress and retrenchment” (p. 479).

The challenges and opportunities continue. As conflicts between Big Pharma and Infotech demonstrate, different industries may have different patent concerns. Merges warns, “Independent patent rights in an interdependent economic scene pose problems specific to the contemporary economy (p. 479). Stay tuned.