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Optimal patent renewals

Cornelli, Francesca and Schankerman, Mark (1996) Optimal patent renewals. EI/13. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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When firms have different R&D productivities, it may be welfare increasing to differentiate patent lives across inventions. The reason is that any uniform patent life provides excessive incentives to do R&D to the low productivity firms and insufficient incentives to the high productivity firms. Such a differentiated scheme is implementable through renewal fees, which endogenously determine an optimal pattern of patent lives. We characterise the optimal pattern of patent life-spans and show how it depends on key features of the economic environment, such as the degree of heterogeneity in R&D productivity across firms, the ability of patentees to appropriate the potential rents generated by R&D and the learning process about the value of the innovation. We illustrate the potential welfare gains associated with optimal renewal schemes through simulation analysis.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 1996 Francesca Cornelli and Mark Schankerman
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
K Law > K Law (General)
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Identification Number: EI/13
Date Deposited: 05 Mar 2008 14:40

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