Scarcity of Ideas and R&D Options: Use it, Lose it, or Bank it

Innovation and Economic Growth

Article Snapshot


Nisvan Erkal and Suzanne Scotchmer


Toulouse Network for Information Technology annual conference, 2009


This paper looks at how to encourage innovation.

Policy Relevance

Courts should use ideas in patent law to give inventors stronger patent protection when new ideas are slow to arrive.

Main Points

  • Everyone is best off when innovation policy offers a larger reward such as a prize or patent for a new idea, when there is a long delay in the arrival of new ideas.

  • Basic ideas arrive first, and useful applications come later, like lasers and laser surgery.

  • If the reward granted is a patent, one sometimes cannot reward both first and second ideas generously. The second inventor pays licensing fees that cut into his profits.
    • If there are many applications for a patented idea, both first and second set of developers can enjoy healthy profits. The first gets fees from many developers, and the second set pays less per developer.

  • No one knows how long application developers will take to find a use for a new basic idea, but patent terms are constant. Some application developers must contend with the first patent owner for a long time, others for only a short time. This is not ideal.

  • Courts should use the “nonobviousness” doctrine in patent law to give key players a larger reward when there is a long delay between ideas, giving broad patents to the first inventor so he has a long period to collect licensing fees from developers.

  • To even out infringement periods between developers, courts have discretion to consider an application non-infringing.

Get The Article

Find the full article online

Search for Full Article