TY - JOUR
T1 - Patent Screening, Innovation, and Welfare
AU - Schankerman, Mark
AU - Schuett, Florian
N1 - Publisher Copyright:
© 2021 The Author(s). Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
PY - 2022/7/1
Y1 - 2022/7/1
N2 - 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.
AB - 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.
KW - Courts
KW - Innovation
KW - Licensing
KW - Litigation
KW - Patent fees
KW - Patent quality
KW - Screening
UR - http://www.scopus.com/inward/record.url?scp=85125987632&partnerID=8YFLogxK
U2 - 10.1093/restud/rdab073
DO - 10.1093/restud/rdab073
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AN - SCOPUS:85125987632
SN - 0034-6527
VL - 89
SP - 2101
EP - 2148
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 4
ER -