Optimal Patent Lengths in Polluting Industries

This paper examines the setting of optimal patent length in polluting industries. We find that in the absence of environmental regulation, the patent office offers longer patents when the industry is polluting than otherwise helping mitigate pollution. In the presence of environmental regulation, however, the patent office sets shorter (longer) patents than otherwise if it assigns similar (different) weights on pollution than the environmental agency does. In each setting, we evaluate the patent inefficiency that arises from the patent office ignoring the environmental damages from pollution and/or environmental regulation. Finally, we extend our model to other contexts, allowing for green innovations, a Pigouvian environmental agency, and inflexible regulations, analyzing how optimal patents are affected