The Tropical Disease Initiative will be a Web-based, community- wide effort where scientists from the public and private sectors join together to discover new treatments

Patents differ from other forms of intellectual property in that independent invention is not a defence to infringement. We argue that the patent rule is inferior in any industry where the cost of independently inventing a product is not too much less than (no less than half) the inventor’s cost. First, the threat of entry by independent invention would induce patent holders to license the technology, lowering the market price. Second, a defence of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patent‐holders’ profits to levels commensurate with their costs of R&D.

We thank the Toulouse Network on Information Technology for financial support, and Terry Hendershott for thoughtful comments. This paper is forthcoming in T. Hendershott, ed., Handbook of Economics and Information Systems, Amsterdam: Elsevier. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.

There is growing public interest in alternatives to intellectual property including, but not limited to, prizes and government grants. We argue that there is no single best mechanism for supporting research. Rather, mechanisms can only be compared within specific creative environments. We collect various historical and contemporary examples of alternative incentives, and relate them to models of the creative process. We give an explanation for why federally funded R&D has moved from an intramural activity to largely a grant process. Finally, we observe that much research is supported by a hybrid system of public and private sponsorship, and explain why this makes sense in some circumstances.

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