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Finance and Patent Length

Frank Partnoy

University of San Diego School of Law


U San Diego Law & Econ Research Paper No. 19

In this paper, I demonstrate the inefficiency of the current and historical patent terms, conduct simulations of an economic model of optimal patent length, and recommend some changes in patent policy based on these findings. First, I sketch the evolution of the current twenty-year patent term and its lack of responsiveness to changes in various financial variables. Unlike patent breadth, patent length has been fixed by legislatures for extended periods of time, even during recent years, when the 1998 State Street decision and it progeny have dramatically expanded patent breadth. Second, I conduct a series of simulations based on a dynamic model of the optimal patent term in order to analyze explicitly the effects of changes in certain financial variables (e.g., interest rates and the structure of patent-related cashflows). I find that the optimal patent term is highly sensitive to changes in the term structure of interest rates and to changes in the timing of cash outflows and inflows related to patents. For example, I find that under certain assumptions a one percent shift in interest rates results in an approximately one-year shift in the optimal patent term. Finally, I propose several alternative regimes under which the patent term could be made to vary in length based on interest rates or other financial variables.

Number of Pages in PDF File: 46

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Date posted: September 27, 2001  

Suggested Citation

Partnoy, Frank, Finance and Patent Length (2001). U San Diego Law & Econ Research Paper No. 19. Available at SSRN: https://ssrn.com/abstract=285144 or http://dx.doi.org/10.2139/ssrn.285144

Contact Information

Frank Partnoy (Contact Author)
University of San Diego School of Law ( email )
5998 Alcala Park
San Diego, CA 92110-2492
United States
619-260-2352 (Phone)
619-260-4180 (Fax)
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