Patent Screening, Innovation, and Welfare

Mark Schankerman, Florian Schuett*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

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.

Original languageEnglish
Pages (from-to)2101-2148
Number of pages48
JournalReview of Economic Studies
Volume89
Issue number4
DOIs
StatePublished - 1 Jul 2022
Externally publishedYes

Funding

FundersFunder number
Seventh Framework Programme340903

    Keywords

    • Courts
    • Innovation
    • Licensing
    • Litigation
    • Patent fees
    • Patent quality
    • Screening

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