Tuesday, November 11, 2003

How Long Should Patents Last?

Here is a link to a Cowles Foundation reprint of William Nordhaus' paper on the issue.

William D. Nordhaus - "The Optimum Life of a Patent: Reply", American Economic Review 62, 1972.

Particularly interesting is the following snippet from the concluding section of the paper:

Taking account of all the problems, the following conclusions seem to be justified.

First a fixed patent life is not optimal in theory, although it may be unavoidable in practice. If we are to err on one side, the analysis suggests too long a patent life is better than too short a patent life. For run-of-the-mill inventions, the losses from monopoly are small compared to the gains from invention. The best way to prevent abuse is to ensure that trivial inventions do not receive patents.

Second, the complications arising from risk, drastic inventions, imperfect product markets, and "inventing around" patents generally point to a longer rather than a shorter patent life.

An interesting undertaking would be to reapply the analysis in the context of software patents, and see whether Nordhaus' conclusions still apply. I'm sure somebody has to have done the work already: anybody know where to look?