Intellectual property rights in the world economy

This chapter broadly summarizes some of the basic economic theory on the working of the patent system. It starts by outlining the role technology plays in economic development, and the way in which economic theory has approached the technology-economy relationship. It then reviews the basic economic motive for establishing a patent system: to solve the incentive problem that firms face when they develop new technologies with potential spillover effects to other firms and consumers. A discussion of alternatives to the patent system is also provided. From an economic point of view, however, a crucial aspect of patents is that they leave some opportunity for spillovers. In other words, patents should not provide a pure monopoly to the inventing firm.the economic logic behind this argument is explained and some general (and abstract) theoretical guidelines are proposed to strike a balance between providing incentives (a legal monopoly for the inventor) and leaving opportunity for spillovers. The chapter concludes with a summary of the debates surrounding issues of patents (and iprs more general) in an international context. The role patents may play in stimulating technology transfer is reviewed, but also critical remarks are made with respect to the ability of a strict patent system alone to achieve technological developments of the poorest nations.keywordsforeign direct investmentintellectual propertytechnology transferworld trade organizationpatent protectionthese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.