INNOVATION AND IMITATION UNDER IMPERFECT PATENT PROTECTION

The paper develops a model in which the spillover of R&D is a conseque nce of a rational investment in imitation. The model incorporates the innovator's choice between patenting and secrecy as a protection devic e. The analysis demonstrates that an increase in patent breadth always discourages resorting to secrecy, whereas the influence of increased patent life is the opposite with large spillovers. An increase in pate nt life can also reduce innovative activity with large spillovers. Und er endogenous imitation, short patents are socially optimal.