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Patent quality and incentives at the patent office

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  • Florian Schuett

Abstract

The objective of patent examination is to separate the wheat from the chaff. Good applications - those satisfying the patentability criteria, particularly novelty and nonobviousness - should be accepted, while bad applications should be rejected. How should incentives for examiners be designed to further this objective? This paper develops a theoretical model of patent examination to address the question. It argues that examination can be described as a moral-hazard problem followed by an adverse-selection problem: the examiner must be given incentives to exert effort (looking for evidence to reject), but also to truthfully reveal the evidence he finds (or lack thereof). The model can explain the puzzling compensation scheme in use at the U.S. patent office, where examiners are essentially rewarded for granting patents, as well as variation in compensation schemes across patent offices. It also has implications for the retention of examiners and for administrative patent review.
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Suggested Citation

  • Florian Schuett, 2013. "Patent quality and incentives at the patent office," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 313-336, June.
  • Handle: RePEc:bla:randje:v:44:y:2013:i:2:p:313-336
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    File URL: http://hdl.handle.net/10.1111/rand.2013.44.issue-2
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    References listed on IDEAS

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    1. Régibeau, P & Rockett, K, 2003. "Are More Important Patents Approved More Slowly and Should They Be?," Economics Discussion Papers 2850, University of Essex, Department of Economics.
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    Cited by:

    1. Lei, Zhen & Wright, Brian D., 2017. "Why weak patents? Testing the examiner ignorance hypothesis," Journal of Public Economics, Elsevier, vol. 148(C), pages 43-56.
    2. Schankerman, Mark & Schütt, Florian, 2016. "Screening for Patent Quality : Examination, Fees, and the Courts," Discussion Paper 2016-046, Tilburg University, Center for Economic Research.
    3. François Lafond & Daniel Kim, 2019. "Long-run dynamics of the U.S. patent classification system," Journal of Evolutionary Economics, Springer, vol. 29(2), pages 631-664, April.
    4. Langinier, Corinne & Marcoul, Philippe, 2020. "Monetary and implicit incentives of patent examiners," Journal of Economics and Business, Elsevier, vol. 110(C).
    5. Yoshimi Okada & Yusuke Naito & Sadao Nagaoka, 2018. "Making the patent scope consistent with the invention: Evidence from Japan," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(3), pages 607-625, September.
    6. Schankerman, Mark & Schütt, Florian, 2016. "Screening for Patent Quality : Examination, Fees, and the Courts," Other publications TiSEM fa319822-6e68-4e05-8547-4, Tilburg University, School of Economics and Management.
    7. Drivas, Kyriakos & Kaplanis, Ioannis, 2020. "The Role of International Collaborations in Securing the Patent Grant," MPRA Paper 99520, University Library of Munich, Germany.
    8. Corinne Langinier & Philippe Marcoul, 2019. "Subjective performance of patent examiners, implicit contracts, and self‐funded patent offices," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(3), pages 251-266, April.
    9. Johannes Koenen & Martin Peitz, 2012. "The Economics of Pending Patents," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 3, Edward Elgar Publishing.
    10. Koenen, Johannes & Peitz, Martin, 2015. "Firm reputation and incentives to “milk” pending patents," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 18-29.
    11. Schankerman, Mark & Schütt, Florian, 2016. "Screening for Patent Quality : Examination, Fees, and the Courts," Other publications TiSEM e9210a8e-ff3b-4f03-823b-a, Tilburg University, School of Economics and Management.
    12. Andrew Eckert & Corinne Langinier, 2014. "A Survey Of The Economics Of Patent Systems And Procedures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 996-1015, December.
    13. Yamauchi, Isamu & Nagaoka, Sadao, 2015. "Does the outsourcing of prior art search increase the efficiency of patent examination? Evidence from Japan," Research Policy, Elsevier, vol. 44(8), pages 1601-1614.
    14. Vidya Atal & Talia Bar, 2014. "Patent Quality and a Two-Tiered Patent System," Journal of Industrial Economics, Wiley Blackwell, vol. 62(3), pages 503-540, September.
    15. OKADA Yoshimi & NAITO Yusuke & NAGAOKA Sadao, 2016. "Contribution of Patent Examination to Making the Patent Scope Consistent with the Invention: Evidence from Japan," Discussion papers 16092, Research Institute of Economy, Trade and Industry (RIETI).
    16. Schuett, F., 2012. "Inventors and Imposters : An Analysis of Patent Examination with Self-Selection of Firms into R&D," Other publications TiSEM cb800431-1d66-4a59-89ef-c, Tilburg University, School of Economics and Management.
    17. Kristie Briggs & Mary Wade, 2014. "More is better: evidence that joint patenting leads to quality innovation," Applied Economics, Taylor & Francis Journals, vol. 46(35), pages 4370-4379, December.
    18. Marco, Alan C. & Sarnoff, Joshua D. & deGrazia, Charles A.W., 2019. "Patent claims and patent scope," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    19. Drivas, Kyriakos & Kaplanis, Ioannis, 2020. "The role of international collaborations in securing the patent grant," Journal of Informetrics, Elsevier, vol. 14(4).
    20. Régibeau, P & Rockett, K & Mariam, S, 2012. "Patent Pendency, Learning Effects, and Innovation Importance at the US Patent Office," Economics Discussion Papers 2863, University of Essex, Department of Economics.
    21. Kim, Yee Kyoung & Oh, Jun Byoung, 2017. "Examination workloads, grant decision bias and examination quality of patent office," Research Policy, Elsevier, vol. 46(5), pages 1005-1019.
    22. 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, September.

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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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