Patent Length and the Rate of Innovation

Abstract

This paper models the effect of patent length on the rate-of-innovation and consumer welfare. We find that the patent length that maximizes the rate-of-innovation exceeds that which maximizes consumer welfare. We show a countervailing effect of patent length upon the "size" and "frequency" of innovation. Longer patents increase the size, but decrease the frequency of innovation. The patent lengths that maximize the rate-of-innovation and welfare represent balance points between size and frequency. The divergence of the welfare maximizing and rate-of-innovation maximizing patent lengths has important policy implications that we briefly explore.