Reinforcing the patent system? Patent fencing, knowledge diffusion and welfare

This article develops an evolutionary model of industry dynamics in order to carry out a richer theoretical analysis of the consequences of a stronger patent system. This model explicitly takes into account the potentially positive effects of the patents: Publication of patents participates to the building of a collective knowledge stock on which the innovations can rely, and dropped patents can provide a source of technological progress for firms that are lagging behind the leaders of the industry. These dimensions of the patent system are used to question the negative results of Vallée & Yildizoglu (2006). The main results of the new model show that these positive effects do not counterbalance the negative effects of a stronger patent system on social welfare and global technological progress, even if it is a source of better protection and higher profits for the firms.