Abstract:
Based on the proposition that economic efficiency is useful for examining legal rules and
institutions; economic analysis of law assumes, „incentives‟ are the essence of economics in
which the efficiency of a given law is determined based on whether it provides an incentive to
individuals to modify their behavior or not. Having this as basis, Ethiopia‟s patent law;
proclamation no 123/1995 concerning Inventions, Minor Inventions, and Industrial Designs,
provides strong protection for inventors of a product or processing like, least developed and
most middle income countries. This stronger protection of the law makes it difficult for local
industries to imitate or innovate a technological product due to their technological capacity. In
order to do so, local production industries have to acquire a license from the multiple patent
owners to produce a single technological product, which increases the aggregate transaction
costs of production companies. When the patents that would be used are complementary, the
problem will double up itself, resulting in problems linked with high transaction costs like, the
tragedy of AC. Therefore, the study aimed to assess the current legal framework to answer
whether the existing legal principles are suitable to address the complementary patents problem
and whether it efficiently dealt it or not. The research has employed a doctrinal methodology in
conjunction with positive and normative economic analysis methods to best answer the problem.
Positive and normative methods are used in order to analyze the efficiency of the patent law
based on economic theories of transaction cost and theory of demand supply and finally to
suggest what ought to be done. It adopted a qualitative approach to data collection, analysis,
and interpretation. The study found that the current legal framework is far behind the existing
global standard concerning the efficient licensing of complementary patents tackling the tragedy
of AC. Accordingly, the study recommended amendments to the current legal framework in line
with the technological and innovation status of the country and introduce pooling arrangements
to reduce the inefficiency of the law resulted from the licensing arrangements of complementary
patents by giving consideration to contemporary technological level of the globe.
