How Do Patents Affect Research Investments?

Patents, Intellectual Property and Innovation and Economic Growth

Article Snapshot


Heidi Williams


NBER Working Paper #23088, January 2017


Do patents benefit society by spurring innovation, or just enable some firms to profit? So far, the evidence does not show that disclosure of inventions in the patent process or stronger patent protection spur innovation. More research is needed.

Policy Relevance

There is no clear evidence that stronger patent rights encourage research. The effect of patents varies depending on the industry.

Main Points

  • Patents are intended to encourage innovation by helping inventors profit from their inventions, but it is unclear whether patent systems encourage innovation overall.
  • To judge whether patents are beneficial, one should ask:
    • How the disclosure of the details of an invention in the patent affects research;
    • Whether broader or longer patent protection increases research;
    • Whether patent protection increases research into related technologies.
  • Patents are essential to the introduction of new products in the chemical industry and the pharmaceutical industry.
    • Chemical and drug patents are clear, as they include the product’s molecular structure.
    • In other industries, secrecy, lead time, and other factors are more important.
  • Broader patent protection within a small nation like Japan does not result in increased research and development spending; changes that affect larger markets might have more effect.
  • Drugs with shorter clinical trials do, in effect, enjoy patent protection for longer terms, and do attract more investment, but this may be due to factors other than the patent term.
  • Academic researchers avoid infringing related patents by strategies such as licensing the patent or inventing around it, but they often ignore patents, as patent holders rarely sue academics.
  • When a patent is invalidated, researchers increase follow-on research in the fields of computers, electronics, and medical instruments, but not in fields related to chemicals or mechanics.
  • There is no evidence that human gene patents lead to follow-on innovation, but there is likewise no evidence that gene patents block such innovation.


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