Do Patents Matter? Empirical Evidence on the Incentive Thesis

HANDBOOK ON LAW, INNOVATION AND GROWTH, Robert E. Litan, ed., Edward Elgar Publishing, 2011

USC CLEO Research Paper No. C11-7

Posted: 25 Apr 2011  

Jonathan Barnett

USC Gould School of Law

Date Written: April 21, 2011

Abstract

The incentive thesis supplies the primary rationale for the patent system: without an exclusionary right, firms will decline to invest in innovations that are subject to expropriation. Empirical inquiry into the incentive thesis’ scope of application has yielded complex results, which are often selectively cited or described incompletely in policy debates. This literature review broadly surveys relevant empirical studies. Taken as a whole, the evidence supports three propositions with a reasonable degree of confidence. First, patents’ incentive effect is a positive function of the difference between innovation costs and imitation costs. Second, patents’ incentive effect is an inverse function of the “appropriation strength” of alternative non-patent instruments by which to increase third-parties’ imitation costs. Third, patents’ incentive effect is a diminishing marginal function of patent strength and, in some cases, can even be reversed beyond a certain level of patent strength.

Suggested Citation

Barnett, Jonathan, Do Patents Matter? Empirical Evidence on the Incentive Thesis (April 21, 2011). HANDBOOK ON LAW, INNOVATION AND GROWTH, Robert E. Litan, ed., Edward Elgar Publishing, 2011; USC CLEO Research Paper No. C11-7. Available at SSRN: https://ssrn.com/abstract=1818242

Jonathan Barnett (Contact Author)

USC Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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