Optimal patent length

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Title: Optimal patent length
Authors: Bergin, James
Permanent link: http://hdl.handle.net/10197/607
Date: 18-Mar-2008
Abstract: The intent of the patent system is to encourage innovation by granting the innovator exclusive rights to a discovery for a limited period of time: with monopoly power, the innovator can recover the costs of creating the innovation which otherwise might not have existed. And, over time, the resulting innovation makes everyone better off. This presumption of improved social welfare is considered here. The paper examines the impact of patents on welfare in an environment where there are large numbers of (small) innovators — such as the software industry. With patents, because there is monopoly for a limited time the outcome is necessarily not socially optimal, although social welfare may be higher than in the no-patent state. Patent acquisition and ownership creates two opposing incentives at the same time: the incentive to acquire monopoly rights conferred by the patent spurs innovation, but subsequent ownership of those rights inhibits innovation (both own innovation and that of others). On balance, which effect will dominate? In the framework of this paper separate circumstances are identified under which patents are either beneficial or detrimental to innovation and welfare; and comparisons are drawn with the socially optimal level of investment in innovation.
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Copyright (published version): 2008 Geary Institute
Subject LCSH: Patents--Cost effectiveness
Technological innovations--Social aspects
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers
Economics Research Collection

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