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Session 1339

Engineering Economics and the Law J. Timothy Cromley BANK ONE CORPORATION

Abstract

Patent and Trade Secret Law is an area of the Law that is very important to engineering and the economy, but it is not among the topics prominently covered (if at all) in a typical course in Engineering Economy (or “Engineering Economics”). To help remedy this apparent deficiency in course coverage, the author presents: a rationale for inclusion of this topic in such a course, an overview of patent and trade secret law, classroom suggestions, and steps for valuing a patent.

1. Why Patent & Trade Secret Law is an Apt Topic for Courses in Engineering Economics

It is widely recognized that relationships exist between law and economics. The University of Chicago, for example, has had a Journal of Law and Economics since 1958.1 The Encyclopedia of Law and Economics, which is published in the Netherlands, has two Nobel Laureates in Economics on its Editorial Board.2

Because important relationships exist between law and economics, it is appropriate to inquire: What area(s) of the law (if any) are most relevant to a course in engineering economics? Environmental law might be a candidate, as it is relevant to environmental engineers, but it is too specialized to be of general interest in a course on engineering economics. Contract law is a possibility, but its appeal is too broad to properly fit into a focused course like engineering economics. Many other areas of the law are not good fits for similar reasons. Patent law and product liability law are good candidates, but as between these two areas of law, patent law is more highly relevant to both engineering and economics because of its unique links to both technology and monopoly. Also, as will be discussed in greater detail later, patent law and the related field of trade secret law are very important to the economy and to the new product decisions made by engineers. Thus, if one area of the law were to be singled out as most relevant to Engineering Economics, it would that of Patent and Trade Secret Law.

But what exactly is Engineering Economics? In 2000, Kim LaScola Needy, Heather Nachtmann, Jerome La Valle, and Ted Eschenbach published the results of a survey of how engineering economy is taught in U.S. universities. 3 Questions included which textbook was being used and which chapters were generally covered. Topics were then summarized and tallied from the chapters listed by the respondents. Commonly covered topics (>60% of respondents) included benefit/cost rates, interest rates, present worth, cash flows, equivalence relationships, depreciation & depletion, sensitivity analysis, replacement analysis, rate of return, income taxes, inflation & deflation, evaluating multiple alternatives, after-tax economic analysis, and uncertainty & risk analysis. Of relevance to the present paper, is the fact that patents and trade secrets were not among the reported topics in the survey.

Proceedings of the 2004 American Society for Engineering Education Annual Conference & Exposition Copyright © 2004, American Society for Engineering Education

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Cromley, J. T. (2004, June), Engineering Economics And The Law Paper presented at 2004 Annual Conference, Salt Lake City, Utah. 10.18260/1-2--13955