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Inventors and Impostors: An Economic Analysis of Patent Examination

  • Florian Schuett

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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Paper provided by European University Institute in its series Economics Working Papers with number ECO2009/28.

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Date of creation: 2009
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Handle: RePEc:eui:euiwps:eco2009/28
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  1. Farrell, Joseph & Shapiro, Carl, 2007. "How Strong Are Weak Patents?," Competition Policy Center, Working Paper Series qt8vg425vj, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  2. Canice Prendergast, 2007. "The Motivation and Bias of Bureaucrats," American Economic Review, American Economic Association, vol. 97(1), pages 180-196, March.
  3. Stuart J. H. Graham & Bronwyn H. Hall & Dietmar Harhoff & David C. Mowery, 2003. "Post-Issue Patent "Quality Control": A Comparative Study of US Patent Re-examinations and European Patent Oppositions," Industrial Organization 0303009, EconWPA.
  4. Elisabetta Iossa & Patrick Legros, 2004. "Auditing and Property Rights," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 356-372, Summer.
  5. Langinier, Corinne & Marcoul, Philippe, 2007. "Patents, Search of Prior Art, and Revelation of Information," Staff General Research Papers 10489, Iowa State University, Department of Economics.
  6. Régibeau, Pierre & Rockett, Katharine, 2007. "Are More Important Patents Approved More Slowly and Should They Be?," CEPR Discussion Papers 6178, C.E.P.R. Discussion Papers.
  7. Song Shin, H, 1996. "Adversarial and Inquisitorial Procedures in Arbitration," Economics Papers 124, Economics Group, Nuffield College, University of Oxford.
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