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Economics of Patents: An Overview, The

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In this paper, we review the economic effects of intellectual property rights and specifically address the economics of the patent system. The production and dissemination of new knowledge is fraught with market failures because knowledge is a public good. Patents provide a second-best solution to the resulting appropriability problem. We review the main benefits and costs of the patent system, focusing on the role that patents play in providing incentives for innovation, in promoting the dissemination of knowledge, and in helping technology transfer and commercialization of new technology. From a more normative perspective, we address the questions of what the features of an optimal patent system are and whether the patent system is socially desirable. We examine the problem of the optimal length and scope of patent protection, both for the case of a single innovation and for the richer case of cumulative innovations. Finally, we review the issues related to how the patent system influences the market structure and research and development investments.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 02-wp293.

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Date of creation: Feb 2002
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Handle: RePEc:ias:cpaper:02-wp293

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  1. DeBrock, Lawrence M, 1985. "Market Structure, Innovation, and Optimal Patent Life," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 28(1), pages 223-44, April.
  2. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 392, C.E.P.R. Discussion Papers.
  3. Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 431, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, National Bureau of Economic Research, Inc, in: Innovation Policy and the Economy, Volume 1, pages 119-150 National Bureau of Economic Research, Inc.
  5. Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(387), pages 581-95, September.
  6. Paula E. Stephan, 1996. "The Economics of Science," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 34(3), pages 1199-1235, September.
  7. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1996. "Optimal Patent Design and the Diffusion of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 60-83, Spring.
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  15. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
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  17. Francesca Cornelli & Mark Schankerman, 1999. "Patent Renewals and R&D Incentives," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 197-213, Summer.
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  20. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 514-26, June.
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  22. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 249-65, September.
  23. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 691-707, September.
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  28. Mazzoleni, Roberto & Nelson, Richard R., 1998. "The benefits and costs of strong patent protection: a contribution to the current debate," Research Policy, Elsevier, Elsevier, vol. 27(3), pages 273-284, July.
  29. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(2), pages 429-36, March.
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Cited by:
  1. Trommetter, M., 2008. "Intellectual property rights in agricultural and agro-food biotechnologies to 2030 (© OECD International Futures Programme)," Working Papers, Grenoble Applied Economics Laboratory (GAEL) 200805, Grenoble Applied Economics Laboratory (GAEL).
  2. Emmanuelle Auriol & Sara Biancini & Rodrigo Paillacar, 2013. "Universal Intellectual Property Rights: Too Much of a Good Thing?," CESifo Working Paper Series 4292, CESifo Group Munich.
  3. Katrin Hussinger, 2006. "Is Silence Golden? Patents Versus Secrecy At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(8), pages 735-752.
  4. GianCarlo Moschini, 2003. "Intellectual Property Rights and the World Trade Organization: Retrospect and Prospects," Center for Agricultural and Rural Development (CARD) Publications, Center for Agricultural and Rural Development (CARD) at Iowa State University 03-wp334, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Michel Trommetter, 2010. "Flexibility in the implementation of intellectual property rights in agricultural biotechnology," European Journal of Law and Economics, Springer, Springer, vol. 30(3), pages 223-245, December.

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