Patent Buyouts: A Mechanism for Encouraging Innovation

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Patent Buyouts: A Mechanism for Encouraging Innovation

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Title: Patent Buyouts: A Mechanism for Encouraging Innovation
Author: Kremer, Michael R.
Citation: Kremer, Michael R. 1998. Patent buyouts: A mechanism for encouraging innovation. Quarterly Journal of Economics 113(4): 1137-1167.
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Abstract: In 1839 the French government purchased the Daguerreotype patent and placed it in the public domain. Such patent buyouts could potentially eliminate the monopoly price distortions and incentives for rent-stealing duplicative research created by patents, while increasing incentives for original research. Governments could offer to purchase patents at their estimated private value, as determined in an auction, times a markup equal to the typical ratio of inventions' social and private value. Most patents purchased would be placed in the public domain, but to induce bidders to reveal their valuations, a few would be sold to the highest bidder.
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