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Non‐Obviousness and Screening
Author(s) -
Kou Zonglai,
Rey Patrick,
Wang Tong
Publication year - 2013
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12031
Subject(s) - patentability , blueprint , innovator , business , robustness (evolution) , risk analysis (engineering) , economics , industrial organization , computer science , intellectual property , engineering , patent law , finance , entrepreneurship , mechanical engineering , biochemistry , chemistry , gene , operating system
The paper offers a novel justification for the non‐obviousness patentability requirement. An innovation involves two stages: research results in a technology blueprint, which development transforms into a profitable activity. An innovator, who is either efficient or inefficient, must rely on outside finance for the development. Only patented technologies are developed. Strengthening the non‐obviousness requirement alleviates adverse selection by discouraging inefficient innovators from doing research, but creates inefficiencies by excluding marginal innovations. We show that it is socially optimal to raise the non‐obviousness requirement so as to exclude bad innovators; we also provide several robustness checks and discuss the policy implications.