nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2007‒08‒08
twelve papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Dual licensing in open source software markets By Stefano Comino; Fabio M. Manenti
  2. Patent Activity and Technical Change By Robert L. Basmann; Michael McAleer; Daniel Slottje
  3. Special Interest Politics and Intellectual Property Rights: An Economic Analysis of Strengthening Patent Protection in the Pharmaceutical Industry By Chu, Angus C.
  4. Complementary research strategies, first-mover advantage and the inefficiency of patents By Luigi Bonatti
  5. Reverse Technology Transfer: A Patent Citation Analysis of the European Chemical and Pharmaceutical Sectors By Paola Criscuolo
  6. Cournot competition among multiproduct firms:specialization through licensing By Luigi Filippini
  7. University-industry relations in Norway By Magnus Gulbrandsen; Lars Nerdrum
  8. Firm Size and Openness: the Driving Forces of University-Industry Collaboration By Roberto Fontana; Aldo Geuna; Mireille Matt
  9. The Impact of Cost-Reducing R&D Spillovers on the Ergodic Distribution of Market Structures By Christopher A. Laincz; Ana Rodrigues
  10. Spillovers, disclosure lags, and incentives to innovate. Do oligopolies over-invest in R&D? By Gianluca Femminis; Gianmaria Martini
  11. The Engine of Growth By Federico Etro
  12. A Concordance between Industries and Technologies Matching the technological fields of the Patentatlas to the German Industry Classification By Tom Broekel

  1. By: Stefano Comino; Fabio M. Manenti
    Abstract: Dual licensing has proved to be a sustainable business model for various commercial software vendors employing open source strategies. In this paper we study the main characteristics of dual licensing and under which conditions it represents a profitable commercial strategy. We show that dual licensing is a form of versioning, whereby the software vendor uses the open source licensing terms in order to induce commercial customers to select the proprietary version of the software. Furthermore, we show that the software vendor prefers dual licensing to a fully proprietary strategy when the customers are very sensitive to the reciprocal terms of the open source license.
    Keywords: Open source software, dual licensing, copyright, versioning, forking.
    JEL: L11 L17 L86 D45
    Date: 2007
  2. By: Robert L. Basmann (Binghampton University); Michael McAleer (School of Economics and Commerce); Daniel Slottje (Southern Methodist University and FTI Consulting)
    Abstract: As creations of the mind, intellectual property includes industrial property and copyrights. This paper presents an aggregate production function of the generalized Fechner-Thurstone (GFT) form to analyze the impact of an important component of intellectual industrial property, namely patent activity, on technical change in the USA for the period 1947-1981. Patents should alter isoquant maps, and measuring their elasticities is both intuitively and empirically appealing. We define a technology-changer as a variable that has an impact on the elasticity of the marginal rate of technical substitution (MRTS) between inputs of the GFT production function over time. Various types of US patent grant activity, specifically total, domestic, foreign, successful and unsuccessful patent applications, are used as instruments for the technology-changer. Using the GFT specification, the impacts of various technology-changers on the elasticity of the mrts between inputs are estimated directly. It is found that granted (or successful) patents, patents granted to foreign companies and individuals, total patent applications, and even unsuccessful patent applications, have significant impacts on the rates at which inputs are substituted for each other over time in production.
    Keywords: GFT production function, patent activity, innovation, technical change, technology-changers, elasticity of the marginal rate of technical substitution.
    JEL: D24 L23 K1
    Date: 2007
  3. By: Chu, Angus C.
    Abstract: Since the 80’s, the pharmaceutical industry has benefited substantially from a series of policy changes that have strengthened the patent protection for brand-name drugs as a result of the industry’s political influence. This paper incorporates special interest politics into a quality-ladder model to analyze the policymakers’ tradeoff between the socially optimal patent length and campaign contributions. The welfare analysis suggests that the presence of a pharmaceutical lobby distorting patent protection is socially undesirable in a closed-economy setting but may improve social welfare in a multi-country setting, which features an additional efficiency tradeoff between monopolistic distortion and international free-riding on innovations.
    Keywords: campaign contributions; intellectual property rights; patent length; special interest politics
    JEL: O34 D72 O31
    Date: 2007–08
  4. By: Luigi Bonatti
    Abstract: In a realistic framework where the potential innovators’ research lines are imperfectly correlated and imitation takes some time, this paper studies an industry regulated by an authority which can tax (subsidize) the firms’ pure profits (R&D expenditures). By comparing the market equilibrium emerging when there is patent protection with the market equilibrium emerging without patents, the paper finds that social welfare is higher in the absence of patents. This result is driven by the fact that—without patents--more than one successful inventor may implement its discovery and enter the market, thus reducing the deadweight loss due to imperfect competition.
    Keywords: Innovation, temporary monopoly, lead time, market regulation, patents.
    JEL: H21 H25 L10 L51 O31
    Date: 2007
  5. By: Paola Criscuolo (SPRU, University of Sussex)
    Abstract: One consequence of the internationalisation of R&D, particularly in high-tech sectors such as chemicals and pharmaceuticals, may be the transfer of foreign technology from the multinational to other firms in its home country. This phenomenon, which may be termed inter-firm reverse technology transfer, has not yet been directly analysed by either the international management literature or the literature on foreign direct investment. But its implications for policy – particularly in Europe – may be significant. Drawing on the evolutionary theory of the multinational, and on the concept of embeddedness, this paper is a first attempt at addressing this issue. We test the hypothesis of inter-firm reverse technology transfer by performing a patent citation analysis on a database of USPTO patents applied for by 24 chemical and pharmaceutical companies over the period 1980-99. Our findings suggest that multinationals act as a channel for the transmission of knowledge developed abroad to other home country firms. These results point to an alternative understanding of foreign direct R&D investment and its implications for both the home country’s technological activity, and its competitive performance in general
    Keywords: Multinational firms; patent citation; embeddedness; international technology transfer
    JEL: F23 L65 O30
    Date: 2007–06–01
  6. By: Luigi Filippini (DISCE, Università Cattolica)
    Abstract: In a duopoly where each firm produces substitute goods, we show that under process innovation, specialization is the equilibrium attained with cross-licensing. Each firm produces only the good for which it has an advantage. Patent pool extension confirms the results.
    Keywords: cross-licensing, patent pool, specialization, process innovation
    JEL: D45 O31
    Date: 2006–12
  7. By: Magnus Gulbrandsen (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research); Lars Nerdrum (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research)
    Abstract: This paper analyses the relationship between universities and industry in Norway. Funding figures, publication and patent data, surveys and interviews all indicate that there has been a slow and steady increase in university-industry relations the last 20 years. In the 1980s we notice an increase in the share of industry funding of university R&D, and the 1990s saw a strong growth in PhD students finding work in firms. Many of these trends are seen all over the OECD areas, although there are large variations across disciplines, institutions and industries. Some evidence exists to suggest that Norwegian firms may be particularly collaborative when it comes to R&D and innovation. There are, however, also barriers to how close the cross-sector relations may become. For example, data on graduates’ transition to work indicate how the shorter-term expectations and needs of firms may be difficult to meet by the universities and colleges.
    Date: 2007–07
  8. By: Roberto Fontana (CESPRI, Bocconi University); Aldo Geuna (SPRU, University of Sussex); Mireille Matt (BETA, University of Strasbourg)
    Abstract: A large number of works have studied university-industry relationships either from a qualitative point of view or relying on a case study of a single university. The aim of this paper is to provide some statistical evidence at the cross-country, cross-industry level to verify some of the hypotheses put forward in the qualitative literature. On the basis of the results of the KNOW survey carried out in seven EU countries in 2000, we examine two main issues. First, the contribution made by Public Research Organisations (PROs) to the innovative process of firms is analysed. Second, the existence and the extent of co-operative R&D projects between firms and PROs are examined. A two-equation econometric model evaluates the effect of firm-specific, sector-specific and country-specific factors (such as firm size, appropriation and signalling, searching of knowledge sources, government support) upon the propensity for and the extent of collaborations between PROs and firms. The analysis in this paper provides some preliminary evidence which allows a better understanding of the firm and industry characteristics that affect the contribution of PROs to firms' innovative activities and to their involvement in R&D collaborations with firms. The estimations produce some evidence to highlight how the size of the firm and its openness to the external environment have a significant and important effect on both the extent of and propensity of PRO-firm collaboration.
    Keywords: university-industry relationships, European Public Research Organisations, firm innovation
    JEL: I28 O31
    Date: 2007–06–05
  9. By: Christopher A. Laincz (Drexel University); Ana Rodrigues (Autoridade da Concorrência)
    Abstract: We extend the literature on knowledge spillovers between firms by studying a dynamic duopoly model of R&D. Our analysis highlights the previously ignored welfare effects of spillovers through dynamic changes in industry concentration. In addition, we find that the impact of imperfect appropriability of R&D on concentration and welfare depends crucially on the manner in which spillovers are obtained. To date, the analysis of the impact of knowledge spillovers between firms has been largely restricted to static two-stage models (R&D decisions followed by product market decisions). These models generally predict suboptimal R&D expenditures and lower welfare. Such models are silent on the evolution of the market structure, and the resulting welfare implications, because they need to assume initial conditions (symmetry or asymmetry). We find that when spillovers require absorptive capacity investment in own R&D, larger spillovers lead to declines in concentration while rates of innovation increase and welfare rises. In contrast, when spillovers are costlessly obtained increases in the extent of spillovers rates of innovation fall leading to losses in welfare through both reduced consumer surplus and firm values, while the effect on concentration is ambiguous.
    Date: 2007–06
  10. By: Gianluca Femminis (DISCE, Università Cattolica); Gianmaria Martini (Università di Bergamo)
    Abstract: We develop a dynamic duopoly, where firms have to take into account a technological externality, that reduces over time their innovation costs, and an inter-firm spillover, that lowers only the second comer's R&D cost. This spillover exerts its effect after a disclosure lag. We identify three possible equilibria, which are classified, according to the timing of R&D investments, as early, intermediate, and late. The intermediate equilibrium is subgame perfect for a wide parameters range. When the innovation size is large, it implies that the duopolistic market equilibrium involves underinvestment. Hence, even in presence of a moderate degree of inter-firms spillover, the competitive equilibrium calls for public policies aimed at increasing the research activity. When we focus on minor innovations -- the case in which, according to the earlier literature, the market equilibrium underinvests -- our results imply that the policies aimed at stimulating R&D have to be less sizeable than suggested before, despite the presence of an inter-firm spillover.
    Keywords: knowledge spillover, dynamic oligopoly
    JEL: L13 L41 O33
    Date: 2007–06
  11. By: Federico Etro (Department of Economics, University of Milan-Bicocca)
    Abstract: I develop a Schumpeterian model where the engine of growth is in the microeconomic structure of the patent races and derive new results on the determinants of growth. Under decreasing marginal productivity in the R&D sector, the equilibrium is characterized by small firms investing too little and the growth process is dynamically ine?cient; the optimal policy for innovation always implies R&D subsidies. When the incumbent monopolists are leaders in the patent races, they engage in large R&D investment and their persistent leadership enhances growth. Other sources of growth may reduce investment inducing a paradoxical negative correlation between growth and R&D spending even if innovations are the main engine of growth. In the open economy, growth is driven by the largest country and increases with its relative size and openness. In a monetary economy, price stickiness induces an inverted U relation between inflation and long run growth.
    Keywords: Growth, Innovation
    JEL: O3 O4 F4
    Date: 2006–10
  12. By: Tom Broekel (Max Planck Institute of Economics, Jena, Germany.)
    Abstract: The Patentatlas by Greif and Schmiedl (2002) represents an important source for patent data in Germany. Its use for industry-speciï¬c studies is however problematic because the correct assignment of patent data classiï¬ed by technological ï¬elds to commonly used industry classiï¬cations is unclear. This paper presents an application-oriented approach to this issue. In using industry-speciï¬c R+D employment numbers on a regional level, an approximate concordance is developed between the 31 technological ï¬elds of the Patentatlas and 21 manufacturing industries, as deï¬ned by the German Industry Classiï¬cation.
    Keywords: Patentatlas, Industry Classiï¬cation, IPC, NACE, Concordance
    JEL: O18 O34 R12
    Date: 2007–07–20

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