A New Design for the Patent System
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A New Design for the Patent System Sam Meng 1
Received: 31 January 2017 / Accepted: 2 February 2018 # Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract Protection of patents is a double-edged sword—while it encourages innovation it causes deadweight loss due to monopolistic production of patented products. The current approach to minimizing the deadweight loss is a compromised one—providing weak patent protection in order to strike a balance between the positive and negative effects of patent rights. Through a scrutiny of the purpose and mechanism of patent protection, this paper suggests a new design for the patent system. This new design aims to stimulate innovation directly while minimizing deadweight loss. Keywords Patent law . Optimal patent design . Patent monopoly . Deadweight loss JEL Classifications K11 . K12 . K23
Introduction Despite many patent law reforms undertaken worldwide, the effectiveness of the modern patent system has been cast in doubt due to many problems associated with the system, including poor patent quality, low usage of patent technology, patent trolls, and most notably, the impediment of incremental innovations, or innovation based on prior innovations. These problems have triggered hot debates on the patent system. While most people believe that the patent system is still workable after reforms, some think the system is either unnecessary or broken and beyond repair. Ordover (1991) argued that appropriately structured patent law and antitrust rules can ensure both the incentives for investment in research and development (R&D) and the diffusing of research results through licensing and other means. Thurow (1997) demonstrated the impact on the system of intellectual property rights, including the patent system, the fundamental shifts in technology and in the economic landscape,
* Sam Meng [email protected]
1
UNE Business School, University of New England, Armidale, NSW 2351, Australia
J Knowl Econ
such as the decline in public knowledge, the emergence of information technology, and the globalization of the economy. He claimed that squeezing today’s innovations into yesterday’s intellectual property system simply does not work and suggested some basic principles for building a new system. Merges (1999) listed the problems related to business concept patents and recommended the US government to adopt a patent opposition system. Bessen and Meurer (2008) detailed the problems in implementing the patent laws and supported their claims be marshaling of empirical data. Their book also provided detailed suggestions for patent reform, including the ones they think are not politically feasible in the near future. Boldrin and Levine (2013) contend that the patent system is unnecessary because market pressure is the main driver of innovations and, although they agree about the positive impact of the patent system, they think the system should be abolished because the pressure of political economy will corrupt any effort for successful patent reform. The negative
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