Less Protection More Innovation

Murat C. Mungan, Boston College and George Mason University

Abstract

The conventional view of patents suggests that reducing patent protections lowers the expected return to being a patentee and therefore retards technological progress. This paper demonstrates a caveat in this view by making use of game theoretical models. When patent strength's effects on the number of potential inventors are considered, it follows that weakening patent protections may actually contribute to technological progress. When patents are strong, R&D becomes an attractive option for a greater number of firms. Firms anticipating that more firms will conduct research may reduce or abandon their efforts fearing that they may be technologically inferior to their rivals, and that they may end up incurring costs to invent a product which may be patented by a rival firm. In short, stronger patents may result in a greater number of firms engaging in initial R&D efforts, but a lower level of average R&D effort by each firm. This may retard rather than foster technological progress.