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This empirical study uses a scientifically selected sample of patents to assess patent quality. The careful evaluation of the assumptions in alternative economic theories about the generation and diffusion of new knowledge demonstrates that the height of the inventive step is critical to effective and efficient patent policy. The book provides a practical introduction to the policy rules affecting the grant of patents, particularly the rules making the inventive step so low. It also offers insights into interactions between examiners and applicants during the patent application process. Finally, the book compares how the rules about inventiveness operate in the USPTO, the EPO and the Australian Patent Office, gives new insights into business method patenting and offers suggestions for raising the height of the inventive step. Patent Policy and Innovation will appeal to academics researching in the patent field, economists, innovation and industry policy advisors, patent policy makers, NGO policy advisors and patent practitioners.