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Prizes and direct funding internalize positive innovation externalities.
Lee, UC Davis Law Professor, 22 (Peter, "Patent Law's Externality Asymmetry." Cardozo Law Review, vol. 43, no. 5, June 2022, pp. 1923-1998. HeinOnline.)
Of course, patents are not the only mechanism for internalizing positive innovation externalities. Direct public funding, tax breaks, and prizes are among many policy levers that governments employ to enable innovators to capture a greater share of the positive externalities they generate. 122 However, patents are the primary legal mechanisms for promoting innovation, and they exist to internalize innovation spillovers.
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