Patent Length and the Timing of Innovative Activity
Joshua S. Gans
University of Toronto - Rotman School of Management; NBER
Stephen P. King
Monash University - Department of Economics; Economic Regulation Authority of Western Australia (ERA); Centre for International Finance and Regulation (CIFR)
Melbourne Business School Working Paper No. 2004-19
The standard result in patent policy, as demonstrated by Gilbert and Shapiro (1990), is that infinitely lived but very narrow patents are optimal as deadweight losses are minimized and spread through time, but inventors can still recover their R&D expenditures. By extending their innovative environment to include timing as an important choice, we demonstrate that a finitely lived, but broader, patent is socially desirable. This is because a patent breadth is a better instrument than length to encourage socially optimal timing. Thus, patents need not be infinitely long in order to encourage a greater number of inventions.
Number of Pages in PDF File: 15
Keywords: Invention, patent length, patent breadth, timing, R&D expenditures
JEL Classification: L4, O34
Date posted: July 1, 2004
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