Less Protection, More Innovation?

19 Pages Posted: 21 Jun 2011 Last revised: 24 Nov 2016

See all articles by Murat C. Mungan

Murat C. Mungan

George Mason University - Antonin Scalia Law School, Faculty

Date Written: March 27, 2012

Abstract

Reward theory, which represents the conventional economic view, suggests that the optimal strength of patents depends on a use-creation tradeoff; the inevitable production of dead-weight losses in the ex post market for the invention for the purpose of fostering technological progress. This paper demonstrates a caveat in this approach by using game theory. Strong patents increase the value of becoming an inventor. As such, more firms are attracted to R&D. However, each firm rationally discounts the probability that it will be the first to obtain a patent, and may therefore reduce or abandon its R&D investment. This leads to a lower invention probability per R&D firm, which in turn may lead to a lower aggregate invention probability. In such cases, weaker patent protections can simultaneously foster innovation and eliminate dead-weight losses in the ex post market for the invention. Hence, contrary to the conventional view, the use-creation tradeoff does not exist globally.

Suggested Citation

Mungan, Murat C., Less Protection, More Innovation? (March 27, 2012). 22 Supreme Court Economic Review 123 (2014), FSU College of Law, Public Law Research Paper No. 507, FSU College of Law, Law, Business & Economics Paper No. 11-10, Available at SSRN: https://ssrn.com/abstract=1865949 or http://dx.doi.org/10.2139/ssrn.1865949

Murat C. Mungan (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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