Method-of-Use Patents, Appropriability, and Antitrust Policy

When an inventor discovers a novel, useful, and non-obvious way to use a patent or unpatented product, the Patent Office may issue a method-of-use patent. Because the method-of-use is information, it suffers from the same appropriability and excludability problems that all information bears. This paper examines vertical integration, patent licensing, and bundled pricing as business strategies for extracting the surplus. It also evaluates potential antitrust challenges to bundled pricing.