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A Patentability Requirement For Sequential Innovation

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  • Ted O'Donoghue

Abstract

This paper investigates patent protection when there is a long sequence of innovations and firms repeatedly supersede each other. There can be insufficient incentives for R&D if successful firms earn market profit only until competitors achieve something better. To solve this problem, patents must provide protection against future innovators. This paper proposes using a patentability requirement aminimuminnovation size required to get a patent toserve this purpose. I showthat a patentability requirement can stimulate R&D investment and increase dynamic efficiency. Intuitively, requiring firms to pursue larger innovations can prolong market incumbency because larger innovations are harder to achieve. Longer market incumbency then implies an increased reward to innovation, stimulating R&D investment.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1185.

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Date of creation: Mar 1997
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Handle: RePEc:nwu:cmsems:1185

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Citations

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Cited by:
  1. Ghosh, Arghya & Kato, Takao & Morita, Hodika, 2007. "Discrete Innovation, Continuous Improvement, and Competitive Pressure," Working Papers 104-27, Department of Economics, Colgate University.
  2. Picard, Pierre M. & van Pottelsberghe de la Potterie, Bruno, 2013. "Patent office governance and patent examination quality," Journal of Public Economics, Elsevier, vol. 104(C), pages 14-25.
  3. Prokop, Jacek & Regibeau, Pierre & Rockett, Katharine, 2010. "Minimum quality standards and novelty requirements in a one-short development race," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(15), pages 1-49.
  4. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
  5. Christian Riis & Xianwen Shi, 2012. "Sequential Innovation and Optimal Patent Design," Working Papers tecipa-447, University of Toronto, Department of Economics.
  6. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
  7. Florian Schuett, 2013. "Inventors and Impostors: An Analysis of Patent Examination with Self-Selection of Firms into R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 660-699, 09.
  8. Robert M. Hunt, 1999. "Nonobviousness and the incentive to innovate: an economic analysis of intellectual property reform," Working Papers 99-3, Federal Reserve Bank of Philadelphia.
  9. Chen, Yongmin & Pan, Shiyuan & Zhang, Tianle, 2012. "(When) Do Stronger Patents Increase Continual Innovation?," MPRA Paper 40874, University Library of Munich, Germany.
  10. 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.
  11. Chu, Angus C., 2007. "Optimal Patent Breadth: Quantifying the Effects of Increasing Patent Breadth," MPRA Paper 3910, University Library of Munich, Germany.
  12. Guido Cozzi & Silvia Galli, 2009. "Science-Based R&D In Schumpeterian Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(s1), pages 474-491, 09.
  13. Nadolnyak, Denis A. & Sheldon, Ian M., 2002. "A Model Of Development Of Agricultural Biotechnological Innovations: Patent Policy Analysis," 2002 Annual meeting, July 28-31, Long Beach, CA 19802, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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