Patent Screening, Innovation, and Welfare

56 Pages Posted: 25 Sep 2020 Last revised: 27 May 2021

See all articles by Mark Schankerman

Mark Schankerman

London School of Economics & Political Science (LSE) - London School of Economics

Florian Schuett

Tilburg Law and Economics Center (TILEC); Tilburg University - Tilburg University School of Economics and Management

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Date Written: March 17, 2021

Abstract

Critics claim that patent screening is ineffective, granting low-quality patents that impose unnecessary social costs. We develop an integrated framework, involving patent office examination, fees, and endogenous validity challenges in the courts, to study patent screening both theoretically and quantitatively. In our model, some inventions require the patent incentive while others do not, and asymmetric information creates a need for screening. We show that the endogeneity of challenges implies that courts, even if perfect, cannot solve the screening problem. Simulations of the model, calibrated on U.S. data, indicate that screening is highly imperfect, with almost half of all patents issued on inventions that do not require the patent incentive. While we find that the current patent system generates positive social value, intensifying examination would yield large welfare gains. The social value of the patent system would also be larger if complemented by antitrust limits on licensing.

Keywords: innovation, patent quality, screening, litigation, courts, patent fees, licensing

JEL Classification: D82, K41, L24, O31, O34, O38

Suggested Citation

Schankerman, Mark and Schuett, Florian, Patent Screening, Innovation, and Welfare (March 17, 2021). TILEC Discussion Paper No. DP2020-024, Available at SSRN: https://ssrn.com/abstract=3697422 or http://dx.doi.org/10.2139/ssrn.3697422

Mark Schankerman (Contact Author)

London School of Economics & Political Science (LSE) - London School of Economics

Florian Schuett

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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