Abstract and Keywords
Classical proofs for the efficiency of markets do not apply to innovation. Since the 1960s, economists have worked to construct a theoretical framework for deciding when patent incentives do and do not make society better off. This chapter reviews the literature’s main findings and asks how well the legal system implements them. It begins by reviewing how patents balance the benefits of faster innovation against the burden of monopoly. It then shows how these arguments change in more complicated models where patents must also coordinate effort across multiple independent inventors. It also asks how faithfully current patent doctrines implement economists’ insights in practice. It explores how our patents framework is extended to other bodies of law, including copyright, trademark, and competitions policy. Finally, it concludes with proposals for aligning current IP law more closely with theory.
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