Author(s)
Alexander Tabarrok
Source
Contributions to Economic Analysis & Policy, Vol.1, No.1, 2002
Summary
This paper looks at how the reality of patent law compares to theory.
Policy Relevance
Patent law would support economic growth more effectively if only products that really need large investments of R&D were protected. Alternatives like tax credits or subsidies could support innovation in other cases.
Main Points
- Supposedly, firms making large up-front investments in research and development (R&D) need patent protection from imitators long enough to recoup their investment.
- In reality, patent law rewards those with the most valuable inventions, not those who spend more on R&D compared to imitators' costs.
- Patent law would be improved if products could be patented only when imitation costs are low compared to R&D costs.
- Patents could be given at 2, 10, or 20 years depending on a rough evaluation of innovation to imitation costs.
- Applicants could be encouraged to apply for patents of shorter length by offering quicker evaluating time.
- Efficiency at the patent office could be improved by focusing on a smaller number of patents at greater length.
- As R&D costs are hard to know up front, the patent office could grant broad patents to start, and courts could narrow the protection later, when costs are known.
- Education, direct subsidies, and tax credits could encourage innovation so that patent policy could avoid over-protection.
