Optimal Patent Design

Patents provide a patentee with a degree of monopoly power over a region of product space. The "breadth" and "duration" of patents are policy choices. Increasing patent breadth and duration will ceteris paribus increase the rent, which an individual inventor could earn from a commercially successful invention. However, the precise nature of the relationship between patent policy and the rate of societal technical advance, which is stimulated by a given patent design, is not well understood. In this chapter, the authors novelly investigate this issue using an agent-based modeling approach. The simulation results obtained raise questions about the real utility of patent policy in promoting technological advance and suggest that other policy instruments are actually more important.