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This analysis highlights the importance of transactions between prior and subsequent innovators to permit valuable research to go forward across the boundaries of prior patent claims. In a recent article focusing on biomedical research,4 Michael Heller and I argue that too many patent rights on 'upstream' discoveries can stifle 'downstream' research and product development by increasing transaction costs and magnifying the risk of bargaining failures. Just as too few property rights leave communally held resources prone to overuse in a 'tragedy of the commons', too many property rights can leave resources prone to underuse in what Heller calls a 'tragedy of the anticommons'. The greater the number of people who need to be brought to agreement in order to permit a research project to proceed, the greater the risk that bargaining will break down or that transaction costs will consume the gains from exchange.


Reproduced by permission of Oxford University Press.