Optimal Patent Renewals

45 Pages Posted: 11 Jul 2008

See all articles by Francesca Cornelli

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

Date Written: January 1996


When firms have different R&D productivities, it may be welfare increasing to differentiate patent lives across inventions. The reason is that the uniform patent life provides excessive incentives to do R&D to the low productivity firms and insufficient incentives to high productivity firms. Such a differentiated scheme is implementable through renewal fees, which endogenously determine an optimal pattern of patent life-spans and show how it depends on key features of the economic environment, such as the degree of heterogeneity in R&D productivity across firms, the ability of patentees to appropriate the potentital rents generated by R&D and the learning process about the value of innovation. The potential welfare gains associated with optimal renewal schemes are illustrated through simulation analysis.

Suggested Citation

Cornelli, Francesca and Schankerman, Mark A., Optimal Patent Renewals (January 1996). LSE STICERD Research Paper No. EI13, Available at SSRN: https://ssrn.com/abstract=1158292

Francesca Cornelli (Contact Author)

London Business School ( email )

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HOME PAGE: http://www.lbs.ac.uk/faculty/fcornelli/

Centre for Economic Policy Research (CEPR)

United Kingdom

Mark A. Schankerman

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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