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Patentability, Industry Structure and Innovation

  • Robert M Hunt

To qualify for a patent, an invention must be new, useful, and nonobvious. This paper presents a model of sequential innovation in which industry structure is endogenous and a standard of patentability determines the proportion of all inventions that qualify for protection. There is a unique patentability standard, or inventive step, that maximizes the rate of innovation by maximizing the number of firms engaged in R&D. Surprisingly, this standard is more stringent for industries disposed to innovate rapidly. If a single standard is applied to heterogeneous industries, it will encourage entry, and therefore innovation, in some industries while discouraging it in others. The model suggest a number of important implications for patent policy.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 618897000000000689.

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Date of creation: 31 Oct 2003
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Handle: RePEc:cla:levarc:618897000000000689
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  1. Green, J.R. & Scotchmer, S., 1993. "On the Division of Profit in Sequential Innovation," Harvard Institute of Economic Research Working Papers 1638, Harvard - Institute of Economic Research.
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  28. Vincenzo Denicol�, 2000. "Two-Stage Patent Races and Patent Policy," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 450-487, Autumn.
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