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Patent Reform: Aligning Reward and Contribution

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  • Carl Shapiro

Abstract

Economists and policy makers have long recognized that innovators must be able to appropriate a reasonable portion of the social benefits of their innovations if innovation is to be suitably rewarded and encouraged. However, this paper identifies a number of specific fact patterns under which the current U.S. patent system allows patent holders to capture private rewards that exceed their social contributions. Such excessive patentee rewards are socially costly, since they raise the deadweight loss associated with the patent system and discourage innovation by others. Economic efficiency is promoted if rewards to patent holders are aligned with and do not exceed their social contributions. This paper analyzes two major reforms to the patent system designed to spur innovation by better aligning the rewards and contributions of patent holders: establishing an independent invention defense in patent infringement cases, and strengthening the procedures by which patents are re-examined after they are issued. Three additional reforms relating to patent litigation are also studied: limiting the use of injunctions, clarifying the way in which "reasonable royalties" are calculated, and narrowing the definition of "willful infringement."

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13141.

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Date of creation: May 2007
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Publication status: published as Patent Reform: Aligning Reward and Contribution , Carl Shapiro. in Innovation Policy and the Economy, Volume 8 , Jaffe, Lerner, and Stern. 2007
Handle: RePEc:nbr:nberwo:13141

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  3. Lemley, Mark A & Shapiro, Carl, 2007. "Patent Hold-Up and Royalty Stacking," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt8638s257, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Krueger to CEA
    by Adam Ozimek in Modeled Behavior on 2011-08-29 11:35:20
  2. “Patent Reform: Aligning Reward and Contribution,” C. Shapiro (2007)
    by afinetheorem in A Fine Theorem on 2012-06-01 04:01:16
  3. “Patent Reform: Aligning Reward and Contribution,” C. Shapiro (2007)
    by afinetheorem in A Fine Theorem on 2012-06-01 04:01:16
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Cited by:
  1. Giovanni Dosi & Joseph Stiglitz, 2013. "The Role of Intellectual Property Rights in the Development Process, with Some Lessons from Developed Countries: An Introduction," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Francesco Bogliacino & Alberto José Naranjo Ramos, 2008. "Optimal intellectual property rights protection: the case of Colombia," Economics Bulletin, AccessEcon, vol. 15(20), pages 1-15.
  3. Zhang, Tianle, 2012. "Patenting in the shadow of independent discoveries by rivals," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 30(1), pages 41-49.
  4. Heisey, Paul W. & King, John L. & Day-Rubenstein, Kelly A. & Bucks, Dale A. & Welsh, Rick, 2010. "Assessing the Benefits of Public Research Within an Economic Framework: The Case of USDA's Agricultural Research Service," Economic Research Report, United States Department of Agriculture, Economic Research Service 94852, United States Department of Agriculture, Economic Research Service.
  5. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 27(1), pages 3-22, Winter.
  6. Michele Boldrin & David K Levine, 2012. "The Case Against Patents," Levine's Working Paper Archive 786969000000000465, David K. Levine.
  7. Lakdawalla, Darius & Sood, Neeraj, 2009. "Innovation and the welfare effects of public drug insurance," Journal of Public Economics, Elsevier, Elsevier, vol. 93(3-4), pages 541-548, April.
  8. Michele Boldrin & David K. Levine, 2012. "The case against patents," Working Papers, Federal Reserve Bank of St. Louis 2012-035, Federal Reserve Bank of St. Louis.
  9. Darius Lakdawalla & Neeraj Sood, 2007. "The Welfare Effects of Public Drug Insurance," NBER Working Papers 13501, National Bureau of Economic Research, Inc.

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