The purpose of this project is to analyze the economic incentives for research and development, the dissemination of technical information through the patenting process, and the effects of the patent law and resulting licensing agreements on product market interaction among successful innovators. The prospects of this type of competition affects the prospective profitability of R & D and, hence, the propensity of firms to invest in R & D activities. These aspects of the process of making and using technological advances are influenced by provisions of the patent law and by antitrust policy. The incentives for patenting intermediate stages of technical improvement will be analyzed. Patents in this context produce a social benefit of spreading technological information and bringing the product to market earlier, but at the same time entail the disadvantage to the firm of increasing competition in subsequent stages of the product market which may, thereby, lower profitability. In addition, the effect of the breadth of patent protection on the pace ofsuccessive product- quality innovations will be studied, as well as the propensity of firms to undertake totally new lines of research, rather than build directly upon previous knowledge.
