Patents act as an incentive to innovate. However, as this paper argues, patents can lead the patent holder to rest on his laurels and at the same time discourage some innovators from innovating, reducing knowledge spillovers. The combined result of the above suggests an inverse U relationship...

This paper introduces the idea that strong patent protection can lead innovators to rest on their laurels, into a simple tournament based framework. Concentrating on optimal patent protection, the one that maximizes production, the model shows that there is a positive relationship between the...