Patents increase consumer prices, prizes avoid the link
Buccafusco, Christopher and Weinstein, Samuel N. (2024) - Christopher Buccafusco is the Edward & Ellen Schwarzman Distinguished Professor at Duke University School of Law. Samuel N. Weinstein is a Professor and Co-Director of the Heyman Center on Corporate Governance at the Benjamin N. Cardozo School of Law, Yeshiva University "Antisocial Innovation," Georgia Law Review: Vol. 58: No. 2, Article 4. Available at: https://digitalcommons.law.uga.edu/glr/vol58/iss2/4
Patents differ from prizes, grants, and tax incentives in another way. While the latter are paid directly by the government (and, thus, taxpayers) through spending, issuing patents doesn’t cost the government much.84 But patents definitely have a price. Patent incentives are financed by consumers of products that incorporate patents who must pay higher prices for those goods.85 By enabling patent owners to charge supracompetitive prices, patents act as a tax paid by consumers for the benefit of innovators.86 Thus, unlike other innovation expenditures, when governments promote innovation with the exclusive rights patents confer, their expenditures are “off-budget.”87 This means that it is enormously difficult to estimate the size of society’s contribution to innovation promotion through higher prices for patented goods.88