Abstract: Utility Standard is the main factor limiting intermediate research of cumulative innovation patented. Based on a two-stage model of innovation game, Analysis of general equilibrium show that research findings in initial innovation would be held in patent rather than trade secrets as the Utility Standard relaxed. And this choice increases the initial innovation investment, while decreasing the sequential investment because the latter innovators must pay royalties to the former. Therefore, patent transfer fee must be kept within reasonable limits to ensure the enterprises participate in innovation. Under this condition, strengthen patentability of intermediate research might improve social welfare i.e. business profits and consumer surplus through accelerating innovative division and forming competitive market. Meanwhile, relaxing Utility Standard would be particularly advantageous when initial innovation is extremely difficult or its spillovers effect is significant.

Key words: the utility standard, cumulative innovation, patentability, innovation incentive, social welfare