Changes

*Allocating value efficiently to components of a multi-component product (‘other dispositions’) is, in general, an extremely difficult problem in economics.

**Suppose that two firm’s patents are used to make a product and that the patents are complementary: one alone would make a product with $10 value but together they make a product with $40 value. How do you allocate the $20 complementarity created between the two of them?

*Given information asymmetries between the firm and the tax collector, any allocation of value will lead to moral hazard.

**Patents on ‘valueless’ inventions will be sought. Suppose that a firm can build a component using public domain knowledge or pursue an almost identical method that embodies the tiniest and least useful of inventive steps but that could be patented. As the patent would qualify the firm for a tax deduction on some allocation of the product’s value, the firm should pursue the patent.