"A key element of innovation policy is the patent system. For the patent system to perform its function of fostering innovation, an adequate process of patent review must be in place. Failure of the patent office and courts to weed out low-quality patents leads ex post to deadweight loss and costly litigation. If anticipated by firms, it may lead ex ante to an inefficient allocation of resources by diverting funds that would otherwise go into R&D towards wasteful rent-seeking activities. Understanding the incentives of the various market actors involved in the process of patent review, and the constraints under which the relevant institutions operate, is essential for designing a better patent system. It is the subject of the present proposal to advance our understanding of these issues. The research project will study how application fees can be used in conjunction with explicit and implicit incentives for examiners and judges to influence the behavior of firms, and how the legal rules used in the determination of patent validity affect these incentives. Ultimately, the results of the research project should therefore contribute to improving the level of innovation in Europe and to a more efficient use of the resources devoted to R&D."