nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2007‒02‒24
nine papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Patents, Trade Secrets and the Correlation Among R&D Projects By Bulut, Harun; Moschini, GianCarlo
  2. Royalty Stacking in High Tech Industries: Separating Myth from Reality By Geradin, Damien; Layne-Farrar, Anna; Padilla, Atilano Jorge
  3. Teaching locals new tricks: foreign experts as a channel of knowledge transfer By Markusen, James R.; Trofimenko, Natalia
  4. The Case of Requests for Examination By Masayo Kani
  5. On Moral Hazard and Joint R&D By Simona Fabrizi; Steffen Lippert
  6. Harnessing Success: Determinants of University Technology Licensing Performance By Belenzon, Sharon; Schankerman, Mark
  7. University research and the location of business R&D By Laura Abramovsky; Rupert Harrison; Helen Simpson
  8. The Return to Knowledge Hierarchies By Thomas Hubbard; Luis Garicano

  1. By: Bulut, Harun; Moschini, GianCarlo
    Abstract: In patent race models, firms' noncooperatively chosen research projects typically display too much correlation. But when there are multiple intellectual property rights protection instruments, we find that the paths chosen in an R&D race can move towards the social optimum.
    Keywords: Intellectual property rights; Parallel R&D; Patent races
    Date: 2007–02–22
  2. By: Geradin, Damien; Layne-Farrar, Anna; Padilla, Atilano Jorge
    Abstract: A few recent contributions have claimed that in high-tech industries—where innovation is often cumulative and products include many components which are protected by patents in the hands of many different patent holders—the cost of obtaining all necessary licenses is too high. Some have even requested sweeping policy reforms to deal with the so-called royalty stacking problem. In this Essay we find that the empirical evidence—including new evidence for the 3G telecom industry—does not corroborate the gloomy predictions of the proponents of the royalty stacking hypothesis. A careful look at the theoretical underpinnings of this hypothesis explains the lack of empirical support. First, three necessary conditions must be satisfied for a royalty stacking problem to exist: (a) innovation must be cumulative, so that the patents are complementary; (b) there must be many patents for a given product; and (c) the many patents must be held by numerous, distinct rights holders. Second, royalty stacking may not be a problem even if the three necessary conditions are met; i.e., the three necessary conditions are not sufficient. And, third, several market mechanisms, such as cross licensing or voluntary patent pools, can be used to mitigate the costs of multiple concurrent patent negotiations. We conclude that the so-called royalty stacking problem is more myth than reality and that there is no reason to adopt the dramatic reforms in antitrust and patent law that have been recently proposed by, inter alia, Lemley and Shapiro (2006).
    Keywords: excessive royalties; hold up; innovation; mobile telecommunications; patent licensing
    JEL: L13 L96 O34
    Date: 2007–02
  3. By: Markusen, James R.; Trofimenko, Natalia
    Abstract: Gains from productivity and knowledge transmission arising from the presence of foreign firms have received a good deal of empirical attention, but theoretical micro-foundations for this mechanism are limited. Here we develop a dynamic model in which foreign experts may train domestic workers who work with them. Gains from training can in turn be decomposed into two types: (a) obtaining knowledge and skills at a lower cost than if they were self-learnt at home, (b) producing domestic skilled workers earlier in time than if the domestic economy had to rediscover the relevant knowledge through 'reinventing the wheel.' We use fixed effects and nearest neighbour matching estimators on a panel of plant-level data for Colombia that identifies the use of foreign experts, to show that these experts have substantial, although not always immediate, positive effects on the wages of domestic workers and on the value added per worker.
    Keywords: foreign experts; knowledge transfer; spillovers
    JEL: F10 F23 O24 O33 O47
    Date: 2007–02
  4. By: Masayo Kani (Graduate School of Economics, Osaka University)
    Abstract: Under the Japanese patent system, an applicant has to request examination within a given period of time after application. This paper studies the timing of a request for examination when return on patent is uncertain. When a firm files a patent application, it acquires a timing option limited for a fixed period and can exercise it at anytime. After modeling a real options model of the request for examination, we estimate it based on micro patent application data. The paper finds that the request for examination is deferred when uncertainty increases. We also find that the probability of requesting examination rises as the time limit approaches since the option value declines with time and falls down to zero at the time limit.
    Keywords: patent, request for examination, real options, and duration analysis
    JEL: C41 L21 O34
    Date: 2007–02
  5. By: Simona Fabrizi (Keele University, Centre for Economic Research and School of Economic and Management Studies); Steffen Lippert (Department of Commerce, Albany Campus, Massey University)
    Abstract: This paper analyzes how the determinants of two entrepreneurs’ choice whether to conduct product innovation R&D projects alone, or in a cross license agreement, or in a research joint venture depend on the intrinsic nature of the R&D projects. Results show that in fundamental research -- which is considered to be affected by moral hazard behavior of the researchers -- there is a systematic bias toward conducting R&D projects alone and against making use of synergies in an RJV. Furthermore, from a social standpoint, in non-fundamental research -- which is considered not to be affected by moral hazard behavior of the researchers -- too few RJVs and too few cross license agreements are chosen; whereas in fundamental research too few RJVs, and too many cross license agreements are chosen.
    Keywords: Monetary policy, zone of discretion, intermediate inflation target.
    JEL: D23 D82 L24 O31 O32
    Date: 2007–01
  6. By: Belenzon, Sharon; Schankerman, Mark
    Abstract: We study the impact of incentive pay, local development objectives and government constraints on university licensing performance. We develop and test a simple contracting model of technology licensing offices, using new survey information together with panel data on U.S. universities for 1995-99. We find that private universities are much more likely to adopt incentive pay than public ones, but ownership does not affect licensing performance conditional on the use of incentive pay. Adopting incentive pay is associated with about 30-40 percent more income per license. Universities with strong local development objectives generate about 30 percent less income per license, but are more likely to license to local (in-state) startup companies. Stronger government constraints are ‘costly’ in terms of foregone license income and startup activity. These results are robust to controls for observed and unobserved heterogeneity.
    Keywords: incentives; licensing; local development; performance pay; technology transfer; universities
    JEL: F23 O31 O32 O33
    Date: 2007–02
  7. By: Laura Abramovsky (Institute for Fiscal Studies); Rupert Harrison (Institute for Fiscal Studies and University College London); Helen Simpson (Institute for Fiscal Studies)
    Abstract: <p>We investigate the relationship between the location of private sector R&D labs and university research departments in Great Britain. We combine establishment-level data on R&D activity with information on levels and changes in research quality from the Research Assessment Exercise. The strongest evidence for co-location is for pharmaceuticals R&D, which is disproportionately located near to relevant university research, particularly 5 or 5* rated chemistry departments. This relationship is stronger for foreign-owned labs, consistent with multinationals sourcing technology internationally. We also find some evidence for co-location with lower rated research departments in industries such as machinery and communications equipment.</p>
    JEL: O3 R11 R13 I23
    Date: 2007–01
  8. By: Thomas Hubbard; Luis Garicano
    Abstract: Hierarchies allow individuals to leverage their knowledge through others. time. This mechanism increases productivity and amplifies the impact of skill heterogeneity on earnings inequality. To quantify this effect, we analyze the earnings and organization of U.S. lawyers and use the equilibrium model of knowledge hierarchies in Garicano and Rossi-Hansberg (2006) to assess how much lawyers, productivity and the distribution of earnings across lawyers reflects lawyers. ability to organize problem-solving hierarchically. We analyze earnings, organizational, and assignment patterns and show that they are generally consistent with the main predictions of the model. We then use these data to estimate the model. Our estimates imply that hierarchical production leads to at least a 30% increase in production in this industry, relative to a situation where lawyers within the same office do not vertically specialize. We further find that it amplifies earnings inequality, increasing the ratio between the 95th and 50th percentiles from 3.7 to 4.8. We conclude that the impact of hierarchy on productivity and earnings distributions in this industry is substantial but not dramatic, reflecting the fact that the problems lawyers face are diverse and that the solutions tend to be customized.
    Date: 2007–01
  9. By: A. Rodriguez-Pose; Riccardo Crescenzi
    Abstract: Research on the impact of innovation on regional economic performance in Europe has fundamentally followed three approaches: a) the analysis of the link between investment in R&D, patents, and economic growth; b) the study of the existence and efficiency of regional innovation systems; and c) the examination of geographical diffusion of regional knowledge spillovers. These complementary approaches have, however, rarely been combined. Important operational and methodological barriers have thwarted any potential crossfertilization. In this paper, we try to fill this gap in the literature by combining in one model R&D, spillovers, and innovation systems approaches. A multiple regression analysis is conducted for all regions of the EU-25, including measures of R&D investment, proxies for regional innovation systems, and knowledge and socio-economic spillovers. This approach allows us to discriminate between the influence of internal factors and external knowledge and institutional flows on regional economic growth. The empirical results highlight how the interaction between local and external research with local and external socio-economic and institutional conditions determines the potential of every region in order to maximise its innovation capacity. They also indicate the importance of proximity for the transmission of economically productive knowledge, as spillovers show strong distance decay effects. In the EU-25 context, only the innovative efforts pursued within a 180 minute travel radius have a positive and significant impact on regional growth performance.
    Keywords: Economic growth, innovation, R&D, knowledge, spillovers,
    JEL: R11 R12 R58
    Date: 2006–01

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