Nonobviousness and the incentive to innovate: an economic analysis of intellectual property reform
AbstractU.S. patent law protects only inventions that are nontrivial advances of the prior art. The legal requirement is called nonobviousness. During the 1980s, the courts relaxed the nonobviousness requirement for all inventions, and a new form of intellectual property, with a weaker nonobviousness requirement, was created for semiconductor designs. Supporters of these changes argue that a less stringent nonobviousness requirement encourages private research and development (R&D) by increasing the probability that the resulting discoveries will be protected from imitation. This paper demonstrates that relaxing the standard of nonobviousness creates a tradeoff--raising the probability of obtaining a patent, but decreasing its value. The author shows that weaker nonobviousness requirements can lead to less R&D activity, and this is more likely to occur in industries that rapidly innovate.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 99-3.
Date of creation: 1999
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-IND-1999-08-04 (Industrial Organization)
- NEP-MIC-1999-08-04 (Microeconomics)
- NEP-TID-1999-09-17 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Klemperer, 1990.
"How Broad Should the Scope of Patent Protection Be?,"
RAND Journal of Economics,
The RAND Corporation, vol. 21(1), pages 113-130, Spring.
- Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
- Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring.
- Philippe Aghion & Peter Howitt, 1990.
"A Model of Growth Through Creative Destruction,"
NBER Working Papers
3223, National Bureau of Economic Research, Inc.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
- Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
- Reinganum, Jennifer F, 1985.
"Innovation and Industry Evolution,"
The Quarterly Journal of Economics,
MIT Press, vol. 100(1), pages 81-99, February.
- Richard Gilbert & Carl Shapiro, 1990.
"Optimal Patent Length and Breadth,"
RAND Journal of Economics,
The RAND Corporation, vol. 21(1), pages 106-112, Spring.
- Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
- Saul Lach & Rafael Rob, 1996.
"R&D, Investment, and Industry Dynamics,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 5(2), pages 217-249, 06.
- Saul Lach & Rafael Rob, 1995. "R&D, investment and industry dynamics," Finance and Economics Discussion Series 95-47, Board of Governors of the Federal Reserve System (U.S.).
- Saul Lach & Rafael Rob, 1992. "R&D, Investment and Industry Dynamics," NBER Working Papers 4060, National Bureau of Economic Research, Inc.
- Green, J.R. & Scotchmer, S., 1993.
"On the Division of Profit in Sequential Innovation,"
Harvard Institute of Economic Research Working Papers
1638, Harvard - Institute of Economic Research.
- Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
- Loury, Glenn C, 1979.
"Market Structure and Innovation,"
The Quarterly Journal of Economics,
MIT Press, vol. 93(3), pages 395-410, August.
- Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
- Scherer, F M, 1972. "Nordhaus' Theory of Optimal Patent Life: A Geometric Reinterpretation," American Economic Review, American Economic Association, vol. 62(3), pages 422-27, June.
- Ted O'Donoghue, 1998.
"A Patentability Requirement for Sequential Innovation,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(4), pages 654-679, Winter.
- Ted O'Donoghue, 1997. "A Patentability Requirement For Sequential Innovation," Discussion Papers 1185, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
- Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
- Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
- Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
- Angus C. Chu, 2009.
"Macroeconomic Effects of Intellectual Property Rights: A Survey,"
IEAS Working Paper : academic research
09-A007, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- Chu, Angus C., 2009. "Macroeconomic Effects of Intellectual Property Rights: A Survey," MPRA Paper 17342, University Library of Munich, Germany.
- David Encaoua & Dominique Guellec & Martinez Catalina, 2011.
"Sistemas de patentes para fomentar la innovacion: lecciones de analisis economico,"
UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
- David Encaoua & Dominique Guellec & Catalina Martínez, 2010. "Sistemas de patentes para fomentar la innovación: Lecciones de análisis económico," Working Papers 1015, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
- Che, XiaoGang & Yang, Yibai & Zhang, Haoyu, 2010. "Outsourcing and R&D Investment with Costly Patent Protection," MPRA Paper 25516, University Library of Munich, Germany.
- Farhauer, Oliver, 2002. "Folgt aus der Theorie des endogenen Wachstums eine neue Wirtschaftspolitik?," Discussion Papers 2002/3, Technische Universität Berlin, School of Economics and Management.
- Chu, Angus C., 2007. "Optimal Patent Breadth: Quantifying the Effects of Increasing Patent Breadth," MPRA Paper 3910, University Library of Munich, Germany.
- Robert M. Hunt, 2006.
"When do more patents reduce R&D?,"
06-6, Federal Reserve Bank of Philadelphia.
- Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006.
"Patent systems for encouraging innovation: Lessons from economic analysis,"
Elsevier, vol. 35(9), pages 1423-1440, November.
- Robert M Hunt, 2003.
"Patentability, Industry Structure and Innovation,"
Levine's Working Paper Archive
618897000000000689, David K. Levine.
- Gilles Koléda, 2007.
"Northern and Southern Patent Novelty Requirement Harmonization, Growth and Trade,"
DEGIT Conference Papers
c012_011, DEGIT, Dynamics, Economic Growth, and International Trade.
- Gilles Koléda, 2005. "Northern and Southern Patent Novelty Requirements Harmonization, Growth and Trade," DEGIT Conference Papers c010_025, DEGIT, Dynamics, Economic Growth, and International Trade.
- Pia Weiss, 2004. "Competitive disadvantage through non-existing software patents," Development and Comp Systems 0402006, EconWPA.
- Chu, Angus C., 2007. "Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption," MPRA Paper 5476, University Library of Munich, Germany.
- Alexandre Almeida & Aurora A.C. Teixeira, 2007. "Does Patenting negatively impact on R&D investment?An international panel data assessment," FEP Working Papers 255, Universidade do Porto, Faculdade de Economia do Porto.
- repec:hal:journl:halshs-00743037 is not listed on IDEAS
- Robert Hunt, 1999. "Patent reform: a mixed blessing for the U.S. economy?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 15-29.
- Florian Köhler, 2011. "Patent cross-licensing, the influence of IP interdependency and the moderating effect of firm size," The Journal of Technology Transfer, Springer, vol. 36(4), pages 448-467, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul).
If references are entirely missing, you can add them using this form.