R & D AND PATENT SYSTEM

Abstract

Technological advancement is vital to a country's economic growth, as it economizes production processes and improves consumer welfare. Undoubtedly, an essential source of such technological improvements comes from R&D activities. Hence a government's insistence on cultivating a conducive environment for optimal R&D activities is both comprehensible and crucial. Many policies have been recommended but patent protection, by far, is the most efficient method. Yet, one question remains - How should a patent grant be designed so that the maximum rate of innovation can be induced? Incidentally, my paper attempts to shed some light on this issue. Specifically, the paper focuses on one aspect of a patent protection - patent breadth. It seeks to prove that neither too narrow nor too broad a patent protection is able to spur substantial interests in R&D activities. Between these two extreme points, theoretically, lies a growth-maximizing patent breadth that maximizes the rate of innovation. These propositions are, in turn, supported by mathematical proofs.