Does the US patent system as currently constituted hold up or push forward the commercialization of technological innovations?

Does the US patent system frustrate or facilitate the inventive activities and entrepreneurial processes central to economic growth?


The US patent system is a solution to a delicate balancing act where the complete absence of intellectual property rights or the overly broad specification of those rights can thwart innovation.

Inventors require the means to earn a return on the years spent perfecting an invention. Conversely, patents extending in perpetuity that require licensing and royalty payments would dissuade legitimate use and encourage excessive imitation. Further, a patent system providing property rights to the original patent holder for all future inventions that built on the original idea is non-optimal.

Such an unbalanced system would discourage innovation.

The US patent system addresses the need for balance by:

  • Providing a fixed-term property right for a specific and novel invention

  • Requiring, in turn, that the design features of the invention be widely disseminated so that they enter the public domain once the term of the patent expires

  • Permitting a patentee to exchange or license the patented invention

The Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity (Hoover IP²) is reviewing the premises of the US patent system and addressing questions of scope, specification, duration, and economic impact of that system.

Hoover IP²'s goals are to:

  • Build a dense network of scholars, from a variety of academic disciplines, who are engaged in research on the US patent system

  • Analyze the implications that may be drawn from those research results

  • Publish the resulting scholarship in peer-reviewed venues

  • Disseminate that scholarship to the larger public


Underlying the US patent system is a fundamental principle of economics first articulated by Adam Smith more than two centuries ago and empirically demonstrated countless times since:

  • Property rights, appropriately defined, give individuals and firms incentives to trade

  • Trade provides incentives to specialize

  • Specialization is essential for technological innovation

Academic research on the patent system tends to be insular and is specific to certain fields, most particularly law. Support from the Hoover IP² project aims both to broaden the number of researchers in the patent literature and to improve the quality of the causal inferences they draw.


A New Dataset on Mobile Phone Patent License Royalties, September 2016 update (Excel download)
Alexander Galetovic, Stephen Haber, and Lew Zaretzki

US Copyright Law
US Code Title 35 – Patents
US Copyright Act of 1976
US Copyright Act of 1790
America Invents Act

US Copyright Office
US Patent and Trademark Office (USPTO)

Glossary of terms
An Economic Review of the Patent System by Fritz Machlup, 1968
The Economic Theory Concerning Patents for Inventions by Arnold Plant, 1934
Hoover IP2 2014 Summer Teaching Institute reading list
Hoover IP2 2015 Summer Teaching Institute reading list
Hoover IP2 published articles
Principles of Patent Law, sixth edition, by F. Scott Kieff, Pauline Newman, Herbert F. Schwartz, Henry E. Smith


The opinions expressed on this website are those of the authors and do not necessarily reflect the opinions of the Hoover Institution or Stanford University.

© 2024 by the Board of Trustees of Leland Stanford Junior University.

Amit Seru

Amit Seru

Senior Fellow

Amit Seru is a Senior Fellow at the Hoover Institution, the Steven and Roberta Denning Professor of Finance at the Stanford Graduate School of Business, a senior fellow at Stanford Institute for Economic Policy Research (SIEPR), and a Research Associate at the National Bureau of Economic Research (NBER). He was formerly a faculty member at the University of Chicago’s Booth School of Business.

overlay image