Handbook on Law, Innovation and Growth
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Handbook on Law, Innovation and Growth

Edited by Robert E. Litan

A central goal of any economy is to achieve rapid and sustained growth. This cannot happen without continued innovation. This landmark Handbook brings together many of the world’s legal scholars to examine features of the legal infrastructure that affect both innovation and growth. Individual chapters explore different legal subject areas, in most cases offering recommendations for rule changes that could accelerate growth, primarily in the context of the US economy. The introductory chapter provides a framework for these discussions and explains why it is time for legal scholarship and research to move in that direction.
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Chapter 9: Why Do Entrepreneurs Patent?

Ted M. Sichelman and Stuart J.H. Graham


Ted M. Sichelman* and Stuart J.H. Graham** 9.1 INTRODUCTION The classical theory of patents posits that society grants, in Thomas Jefferson’s words, ‘the embarrassment of an exclusive patent,’ because doing so provides socially beneficial economic incentives to invent what would be lacking in a free market.1 In particular, if there were not an exclusionary right protecting intellectual creations, again in Jefferson’s words, ‘the moment [the creation] is divulged, it [would] force itself into the possession of every one,’ and the creator would have no means to earn a suitable profit from the creation.2 Moving one step backwards, without the profit afforded by a patent right, creators – at least ones driven by money – would not have an incentive to invent. Beginning in the early 20th century, however, economists began to perceive other important uses for patents. For example, in the early 1900s, the economist A.T. Hadley argued that the patent system ‘has established itself, not primarily as a stimulus for invention or disclosure’, but as a driver of the investment of capital in the use and development of pre-existing inventions.3 In this view, patents provide ex post incentives to commercialize inventions, rather than ex ante incentives to invent.4 * Assistant Professor, University of San Diego, School of Law & Affiliated Scholar, Berkeley Center for Law and Technology (BCLT), University of California, Berkeley, School of Law. ** Assistant Professor, Georgia Institute of Technology, College of Management & Affiliated Scholar, Berkeley Center for Law and Technology (BCLT), University of California, Berkeley, School of Law. 1...

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