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Review of innovation related typologies and models analytical framework. Introduction to innovation and patent economics at micro and macro levels. Overview of the multi-national patent system and its institutional structure.

Micro-motives for using the patent system by and large aligned with macro-motives for having a patent system, albeit with new uses and abuses after the advent of the pro-patent era, calling for new perspectives on the patent system and its trade-offs. A new view is that the patent system provides a contractual infrastructure and a governance mechanism besides incentivizing technological innovations and their diffusion. The literature points at several paradoxes in the innovation spiral – a patenting paradox at both macro- and micro-level, growth and productivity paradoxes and Easterlin’s paradox. All in all R & D (and especially technological diversification) contribute strongly to patents, innovations and (recombinant) growth, with clearly positive links throughout in the innovation spiral on average in recent literature.

A first national Swedish government investigation consisted of about a dozen sub-studies of different aspects of the innovation spiral using triangulation with statistics, questionnaires, surveys, case studies, interviews and patent information analysis. A second international investigation with field studies in selected countries with about 200 interview visits, complemented by international statistics of innovation spiral variables.

Several structural problems existed in the Swedish national innovation system, such as heavy dominance of large firms in R & D and innovation, too few major innovations, especially in new rather than existing business areas, too few mid-sized innovative companies and difficulties for innovative companies to grow into large ones, new innovative large companies and rapidly increasing foreign ownership of innovative companies. Various forms of open innovation were prevalent and important. Patents played no role in fast growing SMEs in general, a minor role in IT companies and a major role in high-tech SMEs and large firms. Much of company sales and most inventions were protected by patents in large firms, for whom their R & D would be reduced by about a third and their sales by about a fourth in the absence of a patent system. The elasticity of innovation spiral variable relationships was clearly positive for large firms. The demand and supply of patent and IP education was deficient and not in accordance with the role of patents and IP in the economy.

Internationalization of patenting routes and patenting work in MNCs and decrease of incoming patent applications for PTOs in small countries despite the overall patenting surge during the pro-patent era. The annual turnover of applicants was very high, partly due to annual fluctuations in patenting frequency at company and individual level, depending in turn on the flow of patentable resources. The decrease in national applications in Sweden in the early 2000s also varied across technologies with a particular downturn in the ICT area, partly due to the IT bubble burst. Changes in R & D and patenting resources were important internal determinants behind both upward and downward changes in patenting frequency for both large and small companies. A strategy change from quantity-oriented patenting during the 1990s to more selective and quality-oriented patenting also decreased patenting propensity as did a decreased supply of venture capital for SMEs. Finally, Sweden has during 1996–2014 maintained a fairly steady rank as about number 11 among nations regarding patenting frequency in the US, while the Asian countries S. Korea, Taiwan, India and especially China have made rapid climbs on that ladder, joining Japan on the highest ten rungs.

A changing economy calls for changing institutional roles, e.g. regarding the role of governments and transnational institutions. Develop a national culture for IP and I & E, strengthen the different types of entrepreneurship (independent, corporate, state, university) and innovation systems (national, sectorial, regional, corporate, military, university) and promote the different forms of open innovation through various means. Support the harmonization of the international patent system, the PCT system and the European UP and UPC and the rationalization of the international patent office organization and the European IP litigation system. Change certain aspects of patentability criteria. Create a national strategy council for innovations and IP.

Understanding the economics of patents involves some fundamental difficulties with long-term determined investment expenditures and undetermined, heavily skewed earnings, difficulties accentuated by developments in the pro-patent era. Patent aggression and disputes with large damages claims have been instrumental in raising patent awareness in the past. A number of detailed government programs and policies were proposed for raising patent awareness and understanding which should be integrated with I & E educational policies. Similarly a number of detailed policy measures were proposed for stimulating company as well as certain government agency patenting such as subsidizing patenting investments along with R & D and improve early stage financing of R & D and patenting in SMEs. Patenting is also promoted by an enlargement of patentable subject matter by relaxing the technical requirement, everything else (like inventive step) being equal, a requirement that is not economically justified. Improved methods for IP valuation and pricing are called for in light of new international accounting roles for IP assets, increasing IP litigation, increasing technology and IP trade, and increasing use of IP for tax avoidance. Finally, patent information analysis for policy-making purposes should be promoted.