Changing the Research Patenting Regime: Schumpeterian Explanation

Starting in the early 1980s, the U.S. patent regime experienced major changes that allowed the patenting of numerous scientific findings lacking in current commercial applications. We assess the rationality of these changes in the legal and institutional environment for science and technology policy. In order to model these changes in the incentives for the commercialization of new ideas, we extend the standard multisector Schumpeterian growth theory by decomposing the product innovation into a two-stage uncertain research activity. This analytical structure, beside suggesting new sources of market and non-market failures, allows us to compare the general equilibrium innovative performance of an economy where early-stage scientific results are patentable with the general equilibrium innovative performance of an economic system where these earlystage results are unpatentable and freely disseminated by public research institutions such as the universities. If researchers are unguided by the invisible hand they risk to invent redundant half-ideas, but public universities are better at internalizing research externalities. When scientists can patent their research, monopolistic research firms restrict entry in the applied R&D. This makes a regime choice a priori controversial and dependent on the exogenous data on technologies. We calibrate the model to the US data and show that in the 70s, a relatively higher applied R&D complexity magnified the public basic R&D inefficiencies and justified the patentability of basic scientific findings.