This paper examines the recent upward trend of patent applications and its impact on Research and Development Expenditure in the U.S. and the EU. Opening with the decline in total factor productivity in the United States, the paper focuses on the decline by analyzing the effect that patents have on research and development expenditure, taking firm size, government subsidization, and historical financial performance, into account. Patents were found to have an increasing effect on research and development expenditure decreasing rate
