Optimal patent renewals

Francesca Cornelli and Mark Schankerman

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: When firms have different R&D productivities, it may be welfare increasing to differentiate patent lives across inventions. The reason is that any uniform patent life provides excessive incentives to do R&D to the low productivity firms and insufficient incentives to the high productivity firms. Such a differentiated scheme is implementable through renewal fees, which endogenously determine an optimal pattern of patent lives. We characterise the optimal pattern of patent life-spans and show how it depends on key features of the economic environment, such as the degree of heterogeneity in R&D productivity across firms, the ability of patentees to appropriate the potential rents generated by R&D and the learning process about the value of the innovation. We illustrate the potential welfare gains associated with optimal renewal schemes through simulation analysis.

Keywords: patents; renewal fees; R&D; fees; welfare gains; productivity; firms. (search for similar items in EconPapers)
JEL-codes: J01 J1 R14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 1996-01
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:3734

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