nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2007‒01‒13
eleven papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. An Economic Model of Fair Use By Thomas J. Miceli; Richard P. Adelstein
  2. Pricing Patents through Citations By Fernando Leiva B.
  3. The dynamics of patent citations By Marco, Alan C.
  4. Trade Balance of Patent Rights: Who Gains What from International Patent Harmonization, and Why? By Deng, Yi
  5. The Value of Certainty in Intellectual Property Rights: Stock Market Reactions to Patent Litigation By Marco, Alan C.
  6. Patent protection, creative destruction, and generic entry in pharmaceuticals: Evidence from patent and pricing data By Marco, Alan C.
  7. "Collaborative R&D in the robot technology in Japan: an inquiry based on patent data analysis (1991-2004)" By Sebastien Lechevalier; Yukio Ikeda; Junichi Nishimura
  8. Restructuring Research: Communication Costs and the Democratization of University Innovation By Ajay K. Agrawal; Avi Goldfarb
  9. International Competition, Growth and Optimal R&D Subsidies By Giammario Impullitti
  10. Market Structure and the Direction of Technological Change By Matthew Mitchell; Andy Skrzypacz
  11. Agglomeration and the Spatial Distribution of Creativity By Roland Andersson; John Quigley; Mats Wilhelmsson

  1. By: Thomas J. Miceli (University of Connecticut); Richard P. Adelstein (Wesleyan University)
    Abstract: The doctrine of fair use allows limited copying of creative works based on the rationale that copyright holders would consent to such uses if bargaining were possible. This paper develops a formal model of fair use in an effort to derive the efficient legal standard for applying the doctrine. The model interprets copies and originals as differentiated products and defines fair use as a threshold separating permissible copying from infringement. The analysis highlights the role of technology in shaping the efficient standard. Discussion of several key cases illustrates the applicability of the model.
    Keywords: Fair use, copyright law, technological improvement
    JEL: K11 O34
    Date: 2005–11
  2. By: Fernando Leiva B. (Economics University of Iowa)
    Abstract: This paper provides formal treatment to the idea of patenting as a form of market stealing between R&D firms. It extends the creative destruction literature by allowing innovations to build off each other forming a network of ideas. Patent citations keep track of this network. The theory maps the distribution of productivities in the development of new ideas onto the distribution of patent values through patent citations. If productivities are drawn from a Pareto-Levy distribution then the distribution of patent values also falls within this class. The theory is then applied to data on US patent citations. Model-based valuations support the assumption of Pareto-distributed productivities. As an added feature, model-based valuations outperform citation counts (the traditional measure) as a proxy for patent values
    Keywords: Patents, Innovation, R&D, Networks
    JEL: O31 O33 D85
    Date: 2006–12–03
  3. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: The use of patent citations as a measure of patent "quality" increased dramatically in recent years. I estimate the hazard of patent citation, and find evidence of unobserved heterogeneity. Hazard estimation provides a means to separate patent quality from citation "inflation."
    Date: 2006–11
  4. By: Deng, Yi (Department of Economics, Southern Methodist University)
    Abstract: The economic implications of international patent harmonization have attracted little empirical scrutiny. Based on patent application and renewal data in major European countries since the early 1980s, this paper examines the empirical relationship between international patenting, R&D, and the "trade flows" of patent rights across national borders. The analysis reveals substantial patent "trade imbalance" among European countries, with size comparable to regular trade balance. Differences among countries' ability in rent appropriation through international patent harmonization are primarily related to their differences in R&D intensity and efficiency, as well as institutional differences in enforcing patent rights.
    Keywords: International Patent Harmonization, Patent Trade Imbalance, Implicit R&D subsidy
    JEL: O31 O34 O38
    Date: 2006–04
  5. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: Using a sample of patents litigated between 1977 and 1997, I estimate stock market reactions to patent litigation decisions and to patent grants. I find that the resolution of uncertainty over validity and infringement is worth as much to the firm as the initial patent right. Each is worth about 1 to 1.5% excess returns. Additionally, I find that there are significant differences pre and post-1982 with the establishment of the Court of Appeals for the Federal Circuit. I also find that there are significant differences in reactions for plaintiff patent-holders and defendant patent-holders. Interestingly, there is no similar effect for appellate court decisions relative to the district court. To my knowledge, this is the first study that measures the stock market reactions to legal outcomes of patent cases.
    Date: 2006–11
  6. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: This paper merges patent citation data with data on pharmaceutical patent expirations, generic entry, and pricing to explore the effects of observable patent characteristics on off-patent and on-patnet pharmaceutical pricing. Using a sample of drug patents facing generic entry in the 1990s, I find that the price of branded drugs increased on average in the face of generic entry. Importantly, I find that the number of patent citations that a drug receives from other firms is correlated with a decrease in markup and a decrease in the duration of the markup. Conversely, self-citations are correlated with higher prices and slower decay in prices. The results indicate that patent citations may signal the degree of inter-molecule substitution. And, importantly, self-citations may indicate a degree of cumulative patenting that enables a firm to effectively extend or strengthen the original patent protection. This research takes a step forward in understanding the distinction between “positive” citations and “negative” citations related to creative destruction.
    Date: 2006–11
  7. By: Sebastien Lechevalier (EHESS and Maison franco-japonaise); Yukio Ikeda (Graduate School of Social Sciences, Yokohama National University and Maison franco-japonaise); Junichi Nishimura (Graduate School of Economics, Hitotsubashi University and Maison franco-japonaise)
    Abstract: The growing trend of collaborative R&D has been well documented recently, both at a global level and through national and industry case studies. However, there is no general agreement on its causes as well as on the motives of the firms collaborating in R&D with other players. The Japanese innovation system (JIS) is no exception. Furthermore, in this case, it is particularly important, because the JIS has been described since the 1970s as dominated by "in-house" R&D by large firms and this feature has been considered as one reason of the limits that the JIS reached at the end of the 1980s. By contrast to the existing literature on collaborative R&D in Japan, this paper focus on the case of the robot technology (RT), by using patent data applied in Japan between 1991 and 2004. The questions we address in this paper are as follows: Did the R&D collaboration in RT increase since the beginning of the 1990s? Did the R&D collaborations lead to higher quality of the outcomes? Is it possible to categorize different forms of collaborations and different types of players (depending on their degree of collaboration)? How to explain the evolution of R&D collaboration, if any? Our results are as follows. First, the level of R&D collaboration in the RT in Japan is overall low and dominated by inter-firm collaborations; but it has increased between 1991 and 2004, especially in the case of collaboration between firms and universities. Second, R&D collaboration has apparently a positive impact on the quality of the patents, but should be more carefully investigated. Third, we find a significant heterogeneity across firms in the practices of collaborations (number of collaborations, choice of partners and "fidelity" with the partners). Fourth, these patterns are tentatively explained by the structural characteristics of the RT (by reference to a transaction cost argument and to the role of science-based technologies) and by firms' capabilities hypothesis; however, it is not possible to clearly identify if one theoretical hypothesis is better supported by the facts.
    Date: 2006–12
  8. By: Ajay K. Agrawal; Avi Goldfarb
    Abstract: We report evidence indicating that Bitnet adoption facilitated increased research collaboration between US universities. However, not all institutions benefited equally. Using panel data from seven top engineering journals, Bitnet connection records, and a variety of institution ranking data, we find that medium-ranked universities were the primary beneficiaries; they benefited largely by increasing their collaboration with top-ranked schools. Furthermore, we find that the magnitude of this effect was greatest for co-located pairs. These results suggest that the most salient effect of lowering communication costs may have been to facilitate gains from trade through the specialization of research tasks. Thus, the advent of Bitnet -- and likely subsequent versions, including the Internet -- seems to have increased the role of second-tier universities in the national innovation system as producers of new, high-quality knowledge.
    JEL: O33 R11 Z13
    Date: 2006–12
  9. By: Giammario Impullitti (Economics NYU)
    Abstract: In this paper I examine the effects of international technological competition on innovation, growth, and optimal R&D subsidies. I focus on a particular dimension of competition: the share of industries where domestic and foreign research firms compete for innovation. In a version of the fully-endogenous quality-ladder growth model I show that the effect of competition on innovation and growth depends on the specification of the research technology. Secondly, I find that increases in foreign competition trigger a business-stealing effect that reduces income and welfare and, regardless of the innovation effect, raises the optimal domestic R&D subsidy. Intuitively, the higher the threat of international competition the more instrumental innovation subsidies will be in helping domestic incumbent firms to retain their shares of the global market. Thirdly, I perform a quantitative exercise: I first build an empirical index of international technological competition and find that in the OECD countries the share of competitive sectors increased from 35 percent in 1973 to 70 percent in 1989. Then, I use this evidence to evaluate the optimality of the U.S. R&D subsidy response to observed competition in that period. I find a welfare loss of the observed policy, relative to the optimal, ranging between 0.2 and 0.5 percentage points of quality-adjusted per-capita consumption. Finally, I extend the model to account for strategic policy complementarities and show that the positive effect of competition on the optimal subsidy is robust to this set up. In addition, I find that competition increases the benefits from R&D policy cooperation.
    Keywords: international competition, trade and gowth, endogenous technical change, strategic industrial policy
    JEL: F12 F43 O31
    Date: 2006–12–03
  10. By: Matthew Mitchell (Department of Economics University of Iowa); Andy Skrzypacz
    Abstract: We study a model where innovation comes in two varieties: improvements on existing products, and new products that expand the scope of a technology. We make this distinction in order to highlight how market structure can determine not only the quantity of innovation but also its direction. We study two market structures. The first is the canonical one from the endogenous growth literature, where innovations can be developed by anyone, and developers market their own innovations. We then consider a more concentrated industry, where all innovation and pricing for a given technology is monopolized. We study the implications of the different market structures for both types of innovation, focusing on differences they induce in the direction of technological change. We apply our model model to the case of a hardware/software technology and analyze which market structure offers greater profits to a monopolist who can monopolize either hardware or software. We compare social welfare across the market structures, and discuss whether one type of innovation should be subsidized over another
    Keywords: Market Strucuture, Innovation
    JEL: L16
    Date: 2006–12–03
  11. By: Roland Andersson (Royal Institute of Technology); John Quigley (University of California, Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Sweden)
    Abstract: This paper analyzes the spatial distribution of "creativity" -- the production of new knowledge. We analyze commercial patents granted in Sweden during 1994-2001 using a panel of one hundred labor market areas which encompass the entire country. We relate patent activity to measures of localization and urbanization, to the industrial composition and size distribution of firms, and to the regional distribution of human capital. Our analysis confirms the importance of human capital and research facilities in stimulating regional patent output. Importantly, our results document the importance of agglomeration and spatial factors in influencing creativity: Patent activity is increased in larger and more dense labor markets and in regions in which a larger fraction of the labor force is employed in medium-sized firms. Our results also indicate that creativity is greater in labor markets with more diverse employment bases and in those which contain a larger share of national employment in certain industries, confirming the importance of urbanization and localization economies in stimulating creativity. Our quantitative results suggest that the urbanization of Sweden during the 1990s had an important effect upon the aggregate level of patent activity in the country, leading to increases of up to five percent in aggregate patents.
    Keywords: Agglomeration,
    Date: 2006–07–13

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