Abstract
Protection of patents is a double-edged sword—while it encourages innovation it causes deadweight loss due to monopolistic production of patented products. The current approach to minimizing the deadweight loss is a compromised one—providing weak patent protection in order to strike a balance between the positive and negative effects of patent rights. Through a scrutiny of the purpose and mechanism of patent protection, this paper suggests a new design for the patent system. This new design aims to stimulate innovation directly while minimizing deadweight loss.
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