Handbook on Law, Innovation and Growth
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Handbook on Law, Innovation and Growth

Edited by Robert E. Litan

A central goal of any economy is to achieve rapid and sustained growth. This cannot happen without continued innovation. This landmark Handbook brings together many of the world’s legal scholars to examine features of the legal infrastructure that affect both innovation and growth. Individual chapters explore different legal subject areas, in most cases offering recommendations for rule changes that could accelerate growth, primarily in the context of the US economy. The introductory chapter provides a framework for these discussions and explains why it is time for legal scholarship and research to move in that direction.
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Chapter 8: Do Patents Matter? Empirical Evidence on the Incentive Thesis

Jonathan M. Barnett


Jonathan M. Barnett The primary justification for the patent system is a simple incentive thesis: in the absence of an exclusionary right, firms will decline to make investments in innovation that are subject to third-party expropriation. Following this proposition, meaningful levels of patent protection are a necessary condition for inducing R&D and related forms of investment in the development and commercialization of new technologies. The incentive thesis is an intellectually appealing proposition that has historically driven legislative, judicial and regulatory applications of the patent system. Consistent with uncontroversial economic theories that tie private investment to property rights in land and other tangible assets, the incentive thesis plausibly accounts for the historical expansion of the patent system roughly coincidentally with the emergence of any technology-intensive market:1 as the modern chemicals industry developed, patent protection was extended to isolated and purified chemicals (1911);2 as the software market developed, it was given patent protection (1981);3 as the biotechnology market developed, patents were extended to genetically-engineered organisms (1980)4 and then to isolated genetic materials (1991);5 and so forth. Most recently, the incentive thesis has driven the passage in 1980 For reasons of scope, this contribution generally draws on illustrations from the U.S. patent system; however, the arguments advanced with respect to the incentive effects of the patent system are intended to apply across jurisdictions. 2 Parke-Davis & Co. v. H.K. Mulford & Co., 169 F.95 (S.D.N.Y. 1911). 3 Diamond v. Diehr, 450 U.S. 174 (1981) (upholding the eligibility of software...

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