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The Economics of the European Patent SystemIP Policy for Innovation and Competition$
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Dominique Guellec and Bruno van Pottelsberghe de la Potterie

Print publication date: 2007

Print ISBN-13: 9780199216987

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780199216987.001.0001

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Patents as an Incentive to Innovate

Patents as an Incentive to Innovate

(p.46) 3 Patents as an Incentive to Innovate
The Economics of the European Patent System

Dominique Guellec

Oxford University Press

This chapter investigates the rationale of patents, their economic role, and the circumstances in which they are the most effective. The utilitarian theory considers patents as an incentive — a policy instrument used by society for encouraging inventions. Patents are a response to the public good nature of knowledge, which makes imitation easier than invention. They are one of the instruments of innovation policy along with grants, prizes, subsidies, universities, and public laboratories. Compared with other instruments, patents are more market friendly, leaving all technical and economic choices to firms and customers; and they restrict the use of knowledge. The evidence so far supports the view that patents are quite effective in encouraging innovation, especially in certain industries like pharmaceuticals or chemicals, and less so in electronics, and have little direct effect in other industries, especially in services.

Keywords:   utilitarian theory, innovation policy, competition policy, policy instrument, imitation

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