DP16715 On the Interaction between Patent Screening and its Enforcement

Author(s): Gerard Llobet, Álvaro Parra, Javier Suarez
Publication Date: November 2021
Keyword(s): Imitation, industry dynamics, Innovation, Intellectual Property, Patent Enforcement, Patent Screening
JEL(s): L26, O31, O34
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16715

This paper explores the interplay between patent screening and patent enforcement. Costly enforcement involves type I and type II errors. When the patent office takes the rates at which such errors occur as given, granting some invalid patents is socially optimal even in the absence of screening costs because it encourages innovation. When the influence on courts' enforcement effort is considered, these same forces imply that screening and enforcement are complementary. This means that, contrary to common wisdom, better screening induces better enforcement but also that an increase in enforcement costs could be optimally accommodated with less rather than more ex-ante screening.