A New Look at the Patent System
In theory, a patent confers perfect appropriability by granting legal monopoly of an invention for a limited period of time in return for a public disclosure that assures, again in theory, widespread diffusion of social benefits after the patent's expiration. The rationale for this social contract rests on the recognition that technological knowledge has certain attributes of a public good. From this perspective, knowledge, once created, is believed to be freely appropriable by others, and the free-rider problem thus limits the incentive to create new knowledge. By conferring property rights that restrict temporarily the wide use of new knowledge, the patent system is supposed to create the incentive to engage in inventive activity and to undertake the costly investment typically required to reduce an invention to practice.
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