This dissertation examines various aspects of the U.S. Patent System. The rst chapterreviews the literature and traces the development of U.S. patent law with an eye towardrecent reform proposals. In the second chapter, I measure the value of patents to rms andidentify factors that contribute to that value by observing the abnormal change in rms'stock market values following court decisions. I nd that rms lose .85% (about $19 million)of their value following a decision that one of their patents is Invalid." Firms only gainabout .7% of their value following a Valid & Infringed" decision. I nd that factors thatthat aect the expectations of investors as to the enforceability of patent rights are at leastas important in determining the contribution of the patent to the rm's market value asare characteristics of the patent. Most prominently, Invalid" decisions caused a .7% (about$15.5 million) greater loss of rm value after the Court of Appeals for the Federal Circuitwas created. I conclude that patents are substantially more valuable to rms because of thischange in the legal landscape. The third chapter examines the impact, on market competitionand ecient bargaining over a license, of three regimes used to calculate damages in patentcases. I focus on product patents in a dierentiated, duopoly setting. I nd that regardlessof the damage regime, the per-unit royalty under ecient bargaining is not unique. As aresult, the reasonable royalty" damage regime's application of a hypothetical negotiation"gives the court signicant discretion in assigning damages. If rms expect the court to choosereasonable royalty damages to maximize incentives to innovate, and patent enforcement iscertain, then the reasonable royalty regime generates higher incentives to innovate thanthe lost prots" or unjust enrichment" regimes. However, if patent enforcement is uncer-tain, the lost prots" regime yields better incentives to innovate for patents covering themost valuable products, as it is the only regime that may deter infringement. The unjustenrichment" regime is the weakest of the three. My results oer an eciency argument forabandoning it.