Optimal Patent Protection: A Macroeconomic Perspective

Abstract The need to balance the positive and negative effects of patent monopoly is at the heart of design and reform of the patent system. However, by scrutinizing prior studies on optimal patent design, this paper has found that the basis for this balanced approach is flawed. Furthermore, a macroeconomic analysis of the patent system confirms that there is no trade-off in patent protection, unless the patent system generates only marginal negative effects. The implication of this finding is that a new patent system design is needed to stimulate innovation directly while minimizing deadweight loss.