The Case for Tailoring Patent Awards Based on the Time-to-Market of Inventions

Abstract

One of the hallmarks of our patent system is that it provides a one-size-fits-all reward for innovation. Few deny a uniform 20-year patent term for all inventions provides too much protection for some, and too little for others. But absent a principled and administrable alternative, the uniform patent system has been our best option. We may know which economic determinants are relevant to a socially optimal patent term and which predispose a patent to stifling future innovation. However, we have lacked a reliable way to measure and synthesize that information in a framework that the government could actually use to tailor patent awards. This paper identifies a readily observable, cross-industry indication of the socially optimal amount of patent protection that different technologies deserve. It demonstrates that “time-to-market,” or the time taken for an invention to reach the market, provides the foundation for a system of tailoring patents that strikes the correct equilibrium, balancing the benefits of innovation against the social costs of patents, both in the form of monopoly pricing and threats to subsequent innovation.