The applicability of diminishing returns law to the patent system

Innovation and invention represent the single best opportunity for an economy to overstep diminishing returns and achieve economic growth by creating new goods and services. Innovation can be thought of as an input in the production process, which can be used many times at no additional cost once it has been generated. Innovation provides new products and services in the market, which is why innovative economies are not constrained in their growth by the law of diminishing returns due to the fact that they grow not by making more of the same, but by making new, better and more diverse goods and services. This means that new patents to protect different ideas are created by many inventors to avoid the law of diminishing returns, but each invention itself is still subject to this law or will be decreased in value during time. Patents are the most important and widely used legal instruments for protecting the intellectual property rights of invention. To be patentable, an invention should be novel, unique, useful, non-obvious and capable of some practical (commercial and industrial) application as can be specified in the patent laws worldwide (Langinier and Moschini, 2002). A patent can be viewed as a contract between society as a whole (licensee) and an individual inventor (patentee).