Innovation Policy and the Economy, Volume 6

Innovation and Economic Growth, Intellectual Property and Patents

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Adam B. Jaffe, Josh Lerner and Scott Stern


Volume 6 in NBER Book Series: Innovation Policy and the Economy, eds. Adam B. Jaffe, Josh Lerner, and Scott Stern, MIT Press, Cambridge MA, 2006


Volume 6 of this series discusses how patents and technology policies can affect innovation.

Policy Relevance

Inefficient patent policy is likely to stymie innovation, and policies that facilitate the development of novel products will make consumers better off.

Main Points

  • Some patents may be easily circumvented; some others are susceptible to legal challenges. When a firm holds such “weak” patents it is more likely to rely on secrecy, decreasing the amount of economic information available in its market.
  • In the United States, patents have become powerful legal weapons over the last two decades, and also have become more difficult to challenge in courts. This may be discouraging innovation.
  • The Internet benefits consumers directly by matching buyers and sellers, in the manner of eBay, and by enabling them to compare prices more easily. Policies that facilitate the development of these and similar technologies may be expected to benefit consumers.
  • External reviews of completed and terminated drug projects, clearer drug development goals, and the creation of a knowledge database about failed projects might permit drug development to proceed more quickly and simultaneously encourage information exchanges between the FDA and pharmaceutical firms.
  • The U.S. share of global science and engineering graduates is declining, and there are fewer jobs for those graduates in the U.S. One likely outcome is a decrease in the dominance of the U.S. in research.
  • It might be that the organization of a market will affect innovation by firms in that market. Exploring this question empirically is difficult; studying factors influencing innovation within individual markets seems to be a better approach than contrasting these factors across many markets.


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