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When U.S. patent law measured the term of the patent from the date of the patent grant, certain inventors used dilatory tactics to delay issuance of their own patent (for up to 40 years). During that time, other companies or individuals would unknowingly develop products or processes based on the first firm's concepts.
Once the other company’s sunk costs were large, the patent applicant would allow the submarine patent to issue, claiming infringement, and demanding supra-competitive royalties for a license to the submarine patent. The company would have to agree to the supra-competitive royalties, forego its production or innovation or be sued for patent infringement. As a result, consumers either pay higher prices for the company’s goods, or never get the benefit of the innovation that the company had to abandon.
U.S. patent law was revised so the patent term now runs for 20 years from the date of filing, plus most patent applications are now published 18 months after the date of filing, making submarine patents much more difficult to create.