Because of the potential impact of the patent system on innovation diffusion, particularly on continuous and/or incremental innovation, patent policy should be of central importance to the review of the national innovation system.
Substantial empirical evidence shows that most industrial innovations are not induced by the patent system. Even in very large markets, such as the USA, only a minority of patents are likely to be induced by the patent system. To the extent that patents do induce innovations, it is the inventiveness of the innovation which gives rise to possible social benefits (externalities, mainly in the form of knowledge spillovers) which may offset the costs of a patent system and thus give rise to a net economic benefit.
On the basis of this evidence about the inducement effect of the patent system, and evidence on the current very low inventiveness standard for patent grant, policy proposals are put forward to re-introduce inventiveness into the patent system, thus making it potentially welfare-enhancing. These proposed changes would also have a major impact in ameliorating the negative impact of the patent system on continuous/incremental innovation
