Patent office governance and patent examination quality

•The quality of patent examination is affected by the governance of patent offices.•Patent examination costs must be balanced with a better judicial protection.•The social planner chooses the highest patent quality level.•Incentives to innovate are too low in offices that seek patent demands or issuances.•The impact of rent seeking patent offices depends on the chosen markups on fees.

The present paper discusses the role of quality in patent examination process from the perspective of patent offices' behavior and organization. After documenting original stylized facts, the paper presents a model in which patent offices set patent fees and the quality level of their examination process. A higher effort in the examination process enhances the patent holders' protection in the judicial system and strengthens the screening of innovations with small inventive steps. We compare the quality of the examination process for various objectives of patent offices. Patent examination quality is the highest in an office maximizing incentives to innovate and the lowest in that maximizing the number of granted patents. A rent-seeking patent office can provide good incentives to innovate if it does not set too high markups on fees.