The Economics of Patents: Lessons from Recent U.S. Patent Reform

Nancy Gallini, Professor of Economics and Research Fellow, Centre for Innovation Law and Policy, both at University of Toronto, Toronto, Ontario, Canada

12/01/2008
(Original Publish Date: 5/2/2002)

New patent applications in the United States by domestic inventors climbed to nearly 150,000 per year by the late 1990s, after hovering around 60,000 per year through most of the 1980s. As shown in Figure 1, the increase in patent applications gave rise to a doubling of new patents granted per year to domestic inventors between 1985 and 1999. Every major industrial sector has been represented in this surge in activity. The high-tech sector has been most prominent, with a doubling of biotechnology patent grants and of computer software patents between 1990 and 2000 (U.S. Patent and Trademark Office, 2000). The largest 100 universities tripled their annual patent output from 1984 to 1994 (Cohen et al., 1998b), and real expenditures on research and development by small and medium-sized firms (fewer than 5,000 employees) more than doubled between 1987 and 1997 (National Science Foundation, 1997).