Science Policy Research Report: The Effects of Patents on Innovation, Diffusion and Access

Evidence-based patent policy can help ensure the patent system achieves its constitutionally mandated goal: To Promote the Progress of Science and the Useful Arts. Between fears that gene patents hinder scientific progress, concerns that patent trolls are a threat to innovation in IT and software, claims that drug patents contribute to high prices of pharmaceuticals, and the counter-arguments that patents are essential for innovation, patent policy has emerged as one of the most controversial aspects of science and technology policy. Patent policy design is difficult: it requires balancing incentives for innovation with benefits from broad access to new technology, two goals that are often at tension with one another. Concerns that the U.S. may not have this balance right have lead to numerous proposals for patent system reform over the past decade.

There is now a considerable body of empirical evidence on the effects of patents. This research report provides a systematic survey of empirical work on patent policy, summarizing the evidence on five main questions central to patent policy-making: (1) How important are patents for innovation? (2) Do patents create incentives for disclosure of information that would otherwise be kept secret? (3) How large are the costs associated with restricted output and higher prices? (4) Do patents hinder follow-on research in contexts where innovation is cumulative? (5) Does the patent system support markets for technology? The report discusses the strengths and limits of different approaches, distills what we have learned about the effects of patents and implications for policy, notes key uncertainties, and indicates where more research is needed. Finally, it summarizes evidence on the effects of major patent policy changes over the past fifty years, including the expansion of patent eligible subject matter, the growth of patenting on publicly funded research, special patent law procedures for pharmaceuticals, and the globalization of patent protection.