29 May 2008

Taxing Intellectual Monopolies

Here's an interesting thought:

He also reported research that demonstrates patent renewal fees can be used to improve the innovation incentives generated by patent rights. Professor Schankerman set out an analysis of renewal fees as a tax on the property right conferred by a patent, and proposed that the effective tax rate be adjusted to provide socially optimal incentives. His analysis suggests that existing renewal fees impose a highly regressive tax on patents, and suggested that renewal fees should be very substantially increased, especially in later years, to make the effective taxation rate progressive.

Imposing high renewal fees would be a disincentive to file frivolous patents. It would also usefully shift discussion of intellectual monopolies to a more objective, economics-based analyses. That's good, because the evidence that such monopolies are not economically justifiable is overwhelming (as the Gowers Review noted in the context of increasing the term of copyright for music performance.)

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