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


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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