Would global patent protection be too weak without international coordination?

Would global patent protection be too weak without international coordination? Would it be too strong with the international coordination mandated by the TRIPS agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights)? We try to answer these questions using a model of patent-setting game between governments. We introduce profit-biased government preferences, trade barriers and firm heterogeneity. We make use of the estimates of a parameter from the political economy literature to proxy for the degree of governments’ profit-bias. Then We calibrate the model using this profit-bias parameter, data on innovative capability of a number of countries and their market sizes for patent-sensitive goods, and data on the fractions of American firms that export and that carry out FDI in foreign countries. We analyze and calibrate the Nash equilibrium and global optimum and find that there is global under-protection of patent rights when there is no international policy coordination. Calibrating the model with data on market sizes and patent counts, we find that requiring all countries to harmonize their patent standards with the equilibrium standard of the most innovative country (the US) does not lead to global over-protection of patent rights. Therefore, there is no evidence that there will be global over-protection of patent rights when the TRIPS agreement is fully enforced.