Patent Policy, Patent Pools, And The Accumulation Of Claims In Sequential Innovation
We present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. We compare innovation activity under three regimes patents,no-patents,andpatentpoolsand ﬁnd that none of them can reach the ﬁrst best. We ﬁnd that the ﬁrst best can be reached through a decentralized tax-subsidy mechanism, by which innovators receive a subsidy when they innovate, and are taxed with subsequent innovations. This ﬁnding implies that optimal transfers work in the exact opposite way as traditional patents. Finally, we consider patents of ﬁnite duration and determine the optimal patent length.
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