In this paper we seek to provide a critical re-evaluation of the patent system. We begin by pointing out that the patent system has many costs, both direct, as well as indirect. Given these costs, one has to be sure that the benefits of the patent system are large enough to outweigh them. The presumed benefits of the patent system are dependent on two implicit assumptions -(i) an increase in appropriability increases the volume of invention, and (ii) inventions are followed by spillover, which are not priced. Unfortunately, we find that both these claims are controversial. We then briefly discuss some recent works that suggest that patents may have other effects that are not captured in the literature.
Patent System, Volume of Invention, Spillover Effects
