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Patent Renewals and R&D Incentives

Author

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  • Cornelli, Francesca
  • Schankerman, Mark

Abstract

In a model with moral hazard and assymmetric information, we show that it can be welfare-improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides excessive R&D incentive to low-productivity firms, and too little to high ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism, and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy.

Suggested Citation

  • Cornelli, Francesca & Schankerman, Mark, 1998. "Patent Renewals and R&D Incentives," CEPR Discussion Papers 1971, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1971
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    More about this item

    Keywords

    Mechanism Design; patent protection; patent renewals; R&D;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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