Advantages And Disadvantages Of Patents

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1. The market reward rationale for the patent system is based on the ability of patents to reduce transaction costs and serve as a transferable asset, thereby allowing for inventor to control the supply of the technology, and for the technology to maintain competitive pricing in the marketplace and recover costs of invention. Specifically, a patent allows for disclosure which prevents inventors from overlapping efforts or from keeping the technology a secret, thereby reducing transaction costs and making it easier to work with interested parties. The transferability of the patented technology further eases collaboration and commercialization efforts, allowing inventors work with appropriate companies who are well able to commercialize the…show more content…
If a company creates a new drug to treat a certain disease, for example, they can get a patent for it and can charge supra-competitive prices as they are the only market player, since the patent restricts other competitors from manufacturing the same medication.

3. The Ex post rationale focuses on the economic functions of patents after they are granted, claiming that the patent system incentivizes the technology to be constructively utilized, enhanced, and commercialized post-patent. In particular, this rationale holds that patents improve economic efficiency (i.e. by reducing transaction costs, allowing for transferability & divisibility, promoting collaboration), allowing for a more efficient marketplace, and promoting investments in the patented technology due to the chance of large rewards in the marketplace in return. For example, the University of Illinois develops a significant amount of patented technology, including the Dry-Grind Corn Milling Process. The patent on this technology signifies to investors and other interested parties in the important functions of the technology in terms of processing corn into more corn products, and the fact that it was developed at a credited institution, initiating outside firms to invest in, enhance, and commercialize the product, improving the technologies competitive edge in the marketplace. The University of Illinois similarly has an incentive to ensure that the technology is productively
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