The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd


  • Bronwyn H. Hall
Reference work entry


A patent is the legal right of an inventor to exclude others from making or using a particular invention. This right is sometimes termed an ‘intellectual property right’ and is viewed as an encouragement for innovation. This article gives a brief history of patenting, and discusses the legal and administrative process for obtaining a patent in the major world jurisdictions. Evidence on patent effectiveness in encouraging innovation is surveyed, and the article concludes with a discussion of the use of patent data in economic analysis.


Biotechnology industry Innovation Intellectual property rights Inventions Patent citations Patent Cooperation Treaty Patent litigation Patent races Patent valuation Patents Pharmaceutical industry Research and development Trade-Related Aspects of Intellectual Property Rights (TRIPS) World Intellectual Property Organization 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Arora, A., A. Fosfuri, and A. Gambardella. 2001. Markets for technology: The economics of innovation and corporate strategy. Cambridge, MA: MIT Press.Google Scholar
  2. Arora, A., M. Ceccagnoli, and W. Cohen. 2003. R&D and the patent premium, Working paper, no. 9431. Cambridge, MA: NBER.CrossRefGoogle Scholar
  3. Arundel, A. 2003. Patents in the knowledge-based economy: Report of the know survey. Maastricht: MERIT, University of Maastricht.Google Scholar
  4. Baldwin, J.R., P. Hanl, and D. Sabourin. 2000. Determinants of innovative activity in Canadian manufacturing firms: The role of intellectual property rights, Working paper, no. 122. Ottawa: Statistics Canada.Google Scholar
  5. Bessen, J., and E. Maskin. 2006. Sequential innovation, patents, and imitation, Working paper. Boston University School of Law and Princeton University.Google Scholar
  6. Bessen, J., and M. Meurer. 2005. The patent litigation explosion. Law and economics,Working paper, no. 05-18. Boston University School of Law.Google Scholar
  7. Bloom, N., J. Van Reenen, and M. Schankerman. 2005. Identifying technology spillovers and product market rivalry, Discussion paper, no. 3916. London: CEPR.Google Scholar
  8. Cohen, W.M., A. Goto, A. Nagata, R.R. Nelson, and J.P. Walsh. 2002. R&D spillovers, patents and the incentives to innovate in Japan and the United States. Research Policy 31: 1349–1367.CrossRefGoogle Scholar
  9. Cremers, K. 2004. Determinants of patent litigation in Germany, Discussion paper, no. 04-72. Mannheim: Centre for European Economic Research (ZEW).Google Scholar
  10. EPO (European Patent Office). 2006. Online. Available at http://www.european-patent- Accessed 4 Jan 2007.
  11. Federal Trade Commission (FTC). 2003. To promote innovation – The proper balance of competition and patent law and policy. Washington, DC: FTC.Google Scholar
  12. Gilbert, R., and C. Shapiro. 1990. Optimal patent length and breadth. RAND Journal of Economics 21: 106–112.CrossRefGoogle Scholar
  13. Ginarte, J.C., and W. Park. 1997. Determinants of patent rights: A cross-national study. Research Policy 26: 283–301.CrossRefGoogle Scholar
  14. Grabowski, H., and J.M. Vernon. 1994. Returns to R&D on new drug introductions in the 1980s. Journal of Health Economics 13: 383–406.CrossRefGoogle Scholar
  15. Griliches, Z., ed. 1984. R&D, patents and productivity. Chicago: University of Chicago Press.Google Scholar
  16. Griliches, Z. 1990. Patent statistics as economic indicators: A survey. Journal of Economic Literature 28: 1661–1707.Google Scholar
  17. Griliches, Z., A. Pakes, and B.H. Hall. 1987. The value of patents as indicators of inventive activity. In Economic policy and technological performance, ed. P. Dasgupta and P. Stoneman. Cambridge: Cambridge University Press.Google Scholar
  18. Griliches, Z., B.H. Hall, and A. Pakes. 1991. R&D, patents, and market value revisited: Is there a second (technological opportunity) factor? Economics of Innovation and New Technology 1 (3): 183–202.CrossRefGoogle Scholar
  19. Hall, B.H., and R. Ziedonis. 2001. The patent paradox revisited: An empirical study of patenting in the US semiconductor industry, 1979–1995. RAND Journal of Economics 32: 101–128.CrossRefGoogle Scholar
  20. Hall, B.H., S. Graham, D. Harhoff, and D.C. Mowery. 2003. Prospects for improving U.S. patent quality via postgrant opposition. Innovation Policy and the Economy 4: 115–143.CrossRefGoogle Scholar
  21. Hall, B.H., A.B.. Jaffe, and M. Trajtenberg. 2005. Market value and patent citations. RAND Journal of Economics 36: 16–38.Google Scholar
  22. Harhoff, D., F. Narin, F.M. Scherer, and K. Vopel. 1999. Citation frequency and the value of patented inventions. Review of Economics and Statistics 81: 511–515.CrossRefGoogle Scholar
  23. Harhoff, D., K. Hoisl, and C. Webb. 2006. European patent citations – How to count and how to interpret them? Working paper. University of Munich, CEPR and OECD.Google Scholar
  24. Heller, M.A., and R.S. Eisenberg. 1998. Can patents deter innovation? The anticommons in biomedical research. Science 280: 698–701.CrossRefGoogle Scholar
  25. Jaffe, A.B.., and J. Lerner. 2001. Reinventing public R&D: Patent policy and the commercialization of national laboratory technologies. RAND Journal of Economics 32: 167–198.CrossRefGoogle Scholar
  26. Jaffe, A.B.., and M. Trajtenberg. 1996. Flows of knowledge from universities and federal labs: Modeling the flow of patent citations over time and across institutional and geographic boundaries. Proceedings of the National Academy of Sciences 93: 12671–12677.CrossRefGoogle Scholar
  27. Jaffe, A.B.., M. Trajtenberg, and R. Henderson. 1993. Geographic localization of knowledge spillovers as evidenced by patent citations. Quarterly Journal of Economics 108: 577–598.CrossRefGoogle Scholar
  28. Jaffe, A.B.., M. Trajtenberg, and M. Fogarty. 2000. The meaning of patent citations: Report of the NBER/Case Western Reserve survey of patentees, Working paper no. 763. Cambridge, MA: NBER.CrossRefGoogle Scholar
  29. JPO (Japanese Patent Office). 2006. A history of system of industrial property rights. Online. Available at = history&lang = en&root = short. Accessed 19 Dec 2006.
  30. Judd, K.L. 1985. On the performance of patents. Econometrica 53: 567–595.CrossRefGoogle Scholar
  31. Klemperer, P. 1990. How broad should the scope of patent protection be? RAND Journal of Economics 21: 113–130.CrossRefGoogle Scholar
  32. Kotabe, M. 1992. A comparative study of U.S. and Japanese patent systems. Journal of International Business Studies 23: 147–168.CrossRefGoogle Scholar
  33. Ladas and Parry LLP. 2003. A brief history of the patent law of the United States. Online. Available at Accessed 19 Dec 2006.
  34. Lanjouw, J.O., and M. Schankerman. 2001. Characteristics of patent litigation: A window on competition. RAND Journal of Economics 32: 129–151.CrossRefGoogle Scholar
  35. Lanjouw, J.O., and M. Schankerman. 2004. Patent quality and research productivity: Measuring innovation with multiple indicators. Economic Journal 114: 441–465.CrossRefGoogle Scholar
  36. Lerner, J. 1995. Patenting in the shadow of competitors. Journal of Law and Economics 38: 463–495.CrossRefGoogle Scholar
  37. Lerner, J. 2002. Patent policy shifts and innovation over 150 years. American Economic Review 92: 221–225.CrossRefGoogle Scholar
  38. Levin, R.C., A.K. Klevorick, R.R. Nelson, and S.G. Winter. 1987. Appropriating the returns from industrial research and development. Brookings Papers on Economic Activity 1987 (3): 783–831.CrossRefGoogle Scholar
  39. Moore, K.A. 2000. Judges, Juries, and patent cases – An empirical peek inside the black box. Michigan Law Review 99 (281): 365–409.CrossRefGoogle Scholar
  40. Moser, P. 2005. How do patent laws influence innovation? Evidence from nineteenth-century world fairs. American Economic Review 95: 1214–1236.CrossRefGoogle Scholar
  41. Nagaoka, S. 2006. Reform of patent system in Japan and challenges. Paper presented at the conference on 21st century innovation systems for Japan and the United States: Lessons from a decade of change. Tokyo: Institute of Innovation Research, Hitotsubashi University.Google Scholar
  42. Nordhaus, W. 1969. Invention, growth and welfare: A theoretical treatment of technological change. Cambridge, MA: MIT Press.Google Scholar
  43. OECD. 1994. The measurement of scientific and technological activities: Using patent data as science and technology indicators. Paris: OECD.CrossRefGoogle Scholar
  44. Reinganum, J.F. 1989. The timing of innovation: Research, development, and diffusion. In Handbook of industrial organization, ed. R. Schmalensee and R.D. Willig, vol. 1. Amsterdam: North-Holland.Google Scholar
  45. Sakakibara, M., and L. Branstetter. 2001. Do stronger patents induce more innovation? Evidence from the 1988 Japanese patent law reforms. RAND Journal of Economics 32: 77–100.CrossRefGoogle Scholar
  46. Schankerman, M., and A. Pakes. 1986. Estimates of the value of patent rights in European countries during the post-1950 period. Economic Journal 96: 1052–1076.CrossRefGoogle Scholar
  47. Scherer, F.M. 1965. Firm size, market structure, opportunity, and the output of patented innovations. American Economic Review 55: 1097–1123.Google Scholar
  48. Schmookler, J. 1966. Invention and economic growth. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  49. Scotchmer, S. 1991. Standing on the shoulders of giants. Journal of Economic Perspectives 5 (1): 29–41.CrossRefGoogle Scholar
  50. Scotchmer, S. 2005. Innovation and incentives. Cambridge, MA: MIT Press.Google Scholar
  51. Trajtenberg, M. 1990. A penny for your quotes: Patent citation and the value of innovations. RAND Journal of Economics 21: 172–187.CrossRefGoogle Scholar
  52. USPTO (United States Patent and Trademark Office). Online. Available at Accessed 4 Jan 2007.
  53. Webb, C., H. Dernis, D. Harhoff, and K. Hoisl. 2005. Analysing European and international patent citations: A set of EPO patent database building blocks, STI working paper, no. 2005/9. Paris: OECD.CrossRefGoogle Scholar
  54. WIPO (World Intellectual Property Organization). Online. Available at Accessed 4 Jan 2007.
  55. Wright, B.D. 1983. The economics of invention incentives: Patents, prizes, and research contracts. American Economic Review 73: 691–707.Google Scholar
  56. Ziedonis, R.H. 2004. Don’t fence me in: Fragmented markets for technology and the patent acquisition strategies of firms. Management Science 50: 804–820.CrossRefGoogle Scholar
  57. Ziedonis, A.A., R.H. Ziedonis, and B.S. Silverman. 1998. Research consortia and the diffusion of technological knowledge: Insights from SEMATECH, Working paper. University of Michigan and University of Toronto.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Bronwyn H. Hall
    • 1
  1. 1.