Did TRIPS Spur Innovation? An Empirical Analysis of Patent Duration and Incentives to Innovate

35 Pages Posted: 7 Aug 2009 Last revised: 1 Jul 2014

See all articles by David Abrams

David Abrams

University of Pennsylvania Law School

Date Written: 2009

Abstract

How to structure IP laws in order to maximize social welfare by striking the right balance between incentives to innovate and access to innovation is an empirical question. It is a challenging one to answer, both because innovation is difficult to value and changes in IP protection are rare. The 1995 TRIPS agreement provides a unique opportunity to learn about this question for two reasons. First, the adoption of the agreement was uncertain until shortly before adoption, making it a plausibly exogenous change to patent duration. Second, the nature of the law change meant that the patent duration change was heterogeneous across patent classes. Using both patent counts and citation-weighted counts, I am able to take advantage of the TRIPS-induced law change to empirically estimate the impact of patent duration on innovation. I find evidence for an increase in innovation due to patent term extension following TRIPS. Both patent counts and citation-weighted counts increased more following TRIPS in those classes that received greater expected term extensions relative to classes receiving shorter extensions. While the precise calibration of innovation valuation is difficult, this paper provides the first attempt to empirically estimate its response to a major change to patent duration, from the TRIPS agreement.

Keywords: intellectual property law, empirical legal research, patent law, science and technology, effect of patent duration on innovation, calibration of innovation valuation, elasticity of innovation

JEL Classification: K11, O31

Suggested Citation

Abrams, David S., Did TRIPS Spur Innovation? An Empirical Analysis of Patent Duration and Incentives to Innovate (2009). University of Pennsylvania Law Review, Vol. 157, P. 1613, 2009, University of Pennsylvania Institute for Law & Economics Research Paper No. 09-24, Available at SSRN: https://ssrn.com/abstract=1443412 or http://dx.doi.org/10.2139/ssrn.1443412

David S. Abrams (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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