Patents and the choice of research projects

This paper examines how patent strength affects R & D competition in a model where two symmetric firms simultaneously choose their research projects. A stronger patent system induces not only greater R & D investment but also more research duplication. It is shown that there exists a range of patent strength in which increasing patent strength discourages innovation. Moreover, as firms behave more collusively in the post-innovation market, the strongest patent system becomes less likely to maximize the probability of innovation.