Fostering Innovation and Development
Edited by Christopher Arup and William van Caenegem
Chapter 3: What are the Costs and Benefits of Patent Systems?
Hazel V.J. Moir Patent systems are one of the oldest policies to promote innovation. So it is surprising how little factual information is available about their economic costs and benefits. The data that are available seem to be regularly ignored in patent policy discussions (Mazzoleni and Nelson 1998). Macdonald (2004) suggests this imperviousness to fact shows that the idea that innovation will not occur without patents has achieved the status of myth. The objective of this chapter is to set out the range of benefits and costs of a patent system,1 identify those elements most critical to sound patent policy and review the evidence available so far, so as to set an agenda to establish an evidence basis for sound patent policy. A sound patent system is defined as one where social benefits exceed social costs, and the system therefore improves a nation’s economic well-being. I. INTRODUCTION Patent policy is based on a conundrum: designed to increase innovation, it operates by initially suppressing the dissemination of new patented technologies. Balance is therefore central to patent policy. The benefits deriving from any induced higher level of innovation must offset, at least at the level of society, the costs due to the grant of monopoly privileges. As yet, no country appears to have undertaken a cost–benefit analysis of their patent system. The earliest, most comprehensive approach remains Machlup’s 1958 report to the US Congress, but needed data are still missing. The sole economist on the 1984 Australian patent review tabled...
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