Patent Buyouts: A Mechanism For Encouraging Innovation

Michael Kremer

The Quarterly Journal of Economics, 1998, vol. 113, issue 4, pages 1137-1167

Abstract: In 1839 the French government purchased the Daguerreotype patent and placed it in the public domain. Such patent buyouts could potentially eliminate the monopoly price distortions and incentives for rent-stealing duplicative research created by patents, while increasing incentives for original research. Governments could offer to purchase patents at their estimated private value, as determined in an auction, times a markup equal to the typical ratio of inventions' social and private value. Most patents purchased would be placed in the public domain, but to induce bidders to reveal their valuations, a few would be sold to the highest bidder. © 2000 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 1998
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