Professor of Economics, London School of Economics. This article is an expanded version of my 2007 Beesley Lecture on Regulation given at the Institute for Directors, and sponsored by the London Business School, and on a lecture given at the AIPPI-UK in 2008. I am grateful to Alberto Galasso, Justin Watts, and Leonard Waverman for helpful comments on earlier versions of this work. Email: firstname.lastname@example.org
This paper examines the argument that patenting has become an impediment to innovative activity, rather than the incentive it was originally designed to be.
Using economic analysis and empirical evidence, I take up three main issues: deterioration in the quality of patents issues, with ‘weak patents’ unlikely to be enforced by courts if challenged; patent thickets, where firms must secure license agreements from many patentees in order to undertake R&D; and the costs of enforcing patent rights.
The analysis leads to five main policy recommendations: 1) an opposition procedure in the patent office, 2) a mechanism for third-party provision of information on relevant prior art, 3) a substantial increase in patent renewal fees to generate a progressive tax on patent rights, 4) an effective, market-based system of patent litigation insurance, and 5) a centralized patent court to increase predictability of patent enforcement.