Is there a case for non-discrimination in the international protection of intellectual property?

We evaluate the case for non-discrimination in international patent protection. When trade is not subject to any frictions/barriers, requiring national treatment (NT) does not affect the rate of innovation (and welfare) since unfavorable discrimination suffered abroad by innovators in the absence of NT is fully offset by favorable discrimination enjoyed by them at home. When trade barriers exist, however, such international offsetting in patent protection is incomplete and innovation incentives are actually lower under NT. By lumping domestic and foreign patent protection together, NT blunts the overall effectiveness of patent protection in incentivizing innovation in the presence of trade barriers. •We evaluate the case for national treatment (NT) in patent protection.•Countries with smaller markets have a stronger incentive to discriminate.•Trade liberalization reduces incentives for discrimination.•In the absence of trade frictions, NT is equivalent to discrimination.•When trade barriers exist, NT yields less global innovation than discrimination.