On the optimal mix of patent instruments

Abstract

A special characteristic of the patent system is that it features multiple patent-policy levers that can be employed by policymakers. In this note, we develop an R&D-based growth model to analyze the optimal mix of patent instruments by considering patent breadth and the division of profit in research joint ventures. Our results are as follows. First, we analytically derive the optimal mix of patent breadth and the profit-division rule. Then, we calibrate the model to quantitatively evaluate the welfare gain from optimizing both patent instruments versus optimizing only patent breadth. We find that the welfare gain can be quantitatively significant.