Optimal Patent Length

James Bergin

No 200808, Working Papers from Geary Institute, University College Dublin

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.

Pages: 36 pages
Date: 2008-03-18
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr, nep-pr~ and nep-mic
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ucd.ie/geary/static/publications/workingpapers/gearywp200808.pdf First version, 2008 (application/pdf)

Related works:
Working Paper: Optimal patent length (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:200808

Access Statistics for this paper

More papers in Working Papers from Geary Institute, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Geary Tech ().