nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2008‒10‒21
fourteen papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Cash Breeds Success : The Role of Financing Constraints in Patent Races By Schroth, Enrique; Szalay, Dezsö
  2. Digital Rights Management and Technological Tying By Jin-Hyuk Kim; ;
  3. A Policy Insight into the R&D-Patent Relationship By Gaetan de Rassenfosse; Bruno van Pottelsberghe de la Potterie
  4. Ad-sponsored Business Models and Compatibility Incentives of Social Networks By Feng Zhu
  6. "Essential" Patents, FRAND Royalties and Technological Standards By Mathias Dewatripont; Patrick Legros
  7. Publish or patent?: Knowledge dissemination in agricultural biotechnology By Michiels, An; Koo, Bonwoo
  8. Knowledge Production in Nanomaterials: An Application of Spatial Filtering to Regional Systems of Innovation By Grimpe, Christoph; Patuelli, Roberto
  9. On the price elasticity of demand for patents By Gaétan de Rassenfosse; Bruno van Pottelsberghe
  10. Trade and Innovation in the Korean Information and Communication Technology Sector By Osanu Onodera; Hann Earl Kim
  11. What's in a (Missing) Name? Status and Signaling in Open Standards Development By Tim Simcoe; David Waguespack; Lee Fleming
  12. The Principle of Subsidiarity and Innovation Support Measures By Arjan Lejour
  13. Experimentation, Patents, and Innovation By Daron Acemoglu; Kostas Bimpikis; Asuman Ozdaglar
  14. On the optimality of academic rankings of regions with RePEc data By Mishra, SK

  1. By: Schroth, Enrique (Faculty of Economics and Business, University of Amsterdam); Szalay, Dezsö (Department of Economics, University of Warwick)
    Abstract: This paper studies the impact of financing constraints on the equilibrium of a patent race. We develop a model where firms finance their R&D expenditures with an investor who cannot verify their effort. We solve for the optimal financial contract of any firm along its best-response function. In equilibrium, any firm in the race is more likely to win the more cash and assets it holds prior to the race, and the less cash and assets its rivals hold prior to the race. We use NBER evidence from pharmaceutical patents awarded between 1975 and 1999 in the US, patent citations, and COMPUSTAT to measure the effect of all the racing firms' cash holdings on the equilibrium winning probabilities. The empirical findings support our theoretical predictions.
    Keywords: Patent Race ; optimal contract ; innovation ; financial constraints
    JEL: G24 G32 L13
    Date: 2008
  2. By: Jin-Hyuk Kim (Pembroke College, University of Cambridge); ;
    Abstract: This paper analyzes DRM-based technological tying, where the content and hardware form a system. A closed DRM system makes the legal content incompatible with a rival’s hardware, whose users must then obtain illegal copies. The main finding is that the tying firm gains market power in a competitive hardware market and invests in product upgrades at a later stage. Welfare implications of the policy that requires an open DRM system are also discussed.
    Keywords: digital rights management, copying, tying
    JEL: L12 L41 M21 O32
    Date: 2008–09
  3. By: Gaetan de Rassenfosse; Bruno van Pottelsberghe de la Potterie
    Abstract: This paper investigates whether patent counts can be taken as indicators of macroeconomic innovation performance. The empirical model explicitly accounts for the two components of patenting output: research productivity and patent propensity. The empirical analysis aims at explaining the `correct' number of priority filings in 34 countries. It confirms that the two components play a substantial role as witnessed by the impact of the design of several policies, namely education, intellectual property and science and technology policies. A major policy implication relates to the design of patent systems, which ultimately induces, or allows for, aggressive patenting strategies.
    Keywords: education policy; patent policy; propensity to patent; R&D productivity; S&T policy
    JEL: O30 O38
    Date: 2008
  4. By: Feng Zhu (Marshall School of Business, University of Southern California)
    Abstract: This paper examines social networks' incentives to establish compatibility under fee and ad-sponsored business models. I analyze the competition between two social networks and show that compatibility is only possible when the two networks are ad-sponsored. I also find that even when both networks are ad-sponsored, a network with a significant installed-base advantage may choose not to be compatible when the cost from sharing the market outweighs the benefit from additional ad profits. Finally, compatibility also requires a significant number of single-homing users. The results are consistent with empirical observations of social networks and suggest that increased adoption of ad-sponsored business models may lead to many de-facto standards in high-technology industries.
    Keywords: Ad-sponsored, Compatibility, Social networks, Business models
    JEL: L15 L10 M21
    Date: 2008–09
  5. By: Srinivasan, C.S.; Crost, Benjamin
    Abstract: Starting with a brief overview of trends in plant variety protection (PVP) in the UK since inception of PVP legislation, this paper assesses the strength of incentives for innovation provided by the PVP regime. We modify and extend models from the patent literature that attempt to infer the private value of innovations from the behaviour of titleholders in relation to the annual renewal of protection. Our results suggest that the average private return to protection from new wheat varieties is fairly modest and that the distribution of these returns is highly skewed. This implies that a large proportion of PVP certificates have very little economic value. The move towards stronger forms of protection for plant variety innovations and the (successful) clamour from the industry for imposition of royalties on farm-saved seed of protected varieties can be understood as a response to the declining returns from variety innovations in agricultural crops brought about by increasing competition and accelerated turnover of varieties. Anecdotal evidence regarding the declining viability of conventional plant breeding for agricultural crops in the UK is also supported by our results.
    Keywords: Research and Development/Tech Change/Emerging Technologies,
    Date: 2008–01–14
  6. By: Mathias Dewatripont; Patrick Legros
    Abstract: In this paper we abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one's patent portfolio, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to "pad" by contributing weak patents. Three main results that emerge from the analysis are that: (i) the threat of court disputes reduces incentives to pad but at the cost of lower production of strong patents; (ii) mitigating this undesirable side-effect calls for a simultaneous increase in the cost of padding, that is, a better filtering of patent applications; (iii) upstream firms have more incentives to pad than vertically-integrated firms which internalize the fact that patent proliferation raises the share of profits going to the upstream segment of the industry but at the expense of its downstream segment. This seems consistent with recent evidence concerning padding.
    Keywords: padding, royalty, standard setting organization, weak patent, Frand
    JEL: L24 L40 O31 O34
    Date: 2008
  7. By: Michiels, An; Koo, Bonwoo
    Abstract: "Plant transformation research has achieved outstanding progress in the development of transgenic crops over the past decades, and the research results have been spread through journal publications and patents. With the recent emergence of stronger intellectual property rights, investments in crop research and the landscape of plant transformation research have changed, along with the patterns of knowledge dissemination. In this paper, we discuss the recent trends in plant transformation research by examining patent and journal publication data during the last decade. The data analysis shows that there have been significant shifts toward applied research by developing countries and toward patenting as a means of knowledge dissemination during the past few decades, reflecting the increasing role of the private sector in developing countries in crop improvement research." from authors' abstract
    Keywords: Biotechnology research, patents, Crop improvement, Science and technology, Genetic resources, Biodiversity, Journal publication, Developing countries,
    Date: 2008
  8. By: Grimpe, Christoph; Patuelli, Roberto
    Abstract: Nanomaterials are seen as a key technology for the 21st Century, and much is expected of them in terms of innovation and economic growth. They could open the way to many radically new applications, which would form the basis of innovative products. In this context, it seems all the more important for regions to put their own innovation systems in place, and to ensure that they offer a suitable location for such activities in order to benefit from the expected growth. Many regions have already done so by establishing ‘science parks’ and ‘nanoclusters’. As nanomaterials are still in their infancy, both public research institutes and private businesses could play a vital role in the process. This paper investigates what conditions and configurations allow a regional innovation system to be competitive in a cutting-edge technology like nanomaterials. We analyse European Patent Office data at the German district level (NUTS-3) on applications for nanomaterial patents, in order to chart the effects of localised research and development (R&D) in the public and private sector. We estimate two negative binomial models in a knowledge production function framework and include a spatial filtering approach to adjust for spatial effects. Our results indicate that there is a significant positive effect of both public and private R&D on the production of nanomaterial patents. Moreover, we find a positive interaction between them which hints at the importance of their co-location for realising the full potential of an emerging technology like nanomaterials.
    Keywords: nanotechnology, innovation, patents, Germany, spatial autocorrelation, spatial filtering
    JEL: L60 O32
    Date: 2008
  9. By: Gaétan de Rassenfosse (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and ECARES, Université Libre de Bruxelles, Brussels.); Bruno van Pottelsberghe (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles and ECARES, Université Libre de Bruxelles, Bruegel, Brussels and CEPR, London.)
    Abstract: This paper investigates whether patent fee policies are a potential factor underlying the boom in patent applications observed in major patent offices. We provide the first panel-based evidence suggesting that fees affect the demand for patents in three major patent offices (EPO, USPTO and JPO), with a price elasticity of about -0.4 (similar to that of the residential demand for oil or water). The laxity of fee policies adopted by patent offices over the past 25 years therefore contributed, to a significant extent, to the rising propensity to patent observed since the mid-nineties. This is especially true at the European Patent Office, which has dramatically decreased its fees since the mid-1990s.
    Keywords: patent cost, patenting fees, price elasticity, patent systems, propensity to patent
    JEL: O30 O31 O38 O57
    Date: 2008–10
  10. By: Osanu Onodera; Hann Earl Kim
    Abstract: This paper is one of five case studies which is a part of a larger project looking at the various effects that trade and investment can have on innovation. This paper studies the effect of trade and investment liberalisation on Korea’s Information and communication technology (ICT) sector and finds that trade and investment have played a crucial role in innovation in the sector. In the initial stages of development, imported capital goods and components, joint ventures, licensing and Original Equipment Manufacturer (OEM) contracts were important sources of technology and exports were key to gain the necessary economies of scale for innovation. Free trade and investment policies in the 1990s and stronger protection of intellectual property rights have led to an increase in R&D and innovation and has led to the transformation of Korea into a knowledge based economy in the recent decade.
    Keywords: Korea, innovation, ICT, intellectual property rights, patents, information and communication technologies, trade reform, Information Technology Agreement
    JEL: O
    Date: 2008–09–26
  11. By: Tim Simcoe (Joseph L. Rotman School of Management, University of Toronto); David Waguespack (Robert H. Smith School of Business, University of Maryland); Lee Fleming (Harvard business School)
    Abstract: How much are we influenced by an author's identity? If identity matters, is it because we have a ``taste for status" or because it offers a useful shortcut --- a signal that is correlated with the likely importance of their ideas? This paper presents evidence from a natural experiment that took place at the Internet Engineering Task Force (IETF) --- a community of engineers and computer scientists who develop the protocols used to run the Internet. The results suggest that IETF participants use authors' identity as a signal or filter, paying more attention to proposals from high-status authors, and this has a surprisingly large impact on publication outcomes. There is little evidence of a “taste" for status.
    JEL: L1 O3
    Date: 2008–10
  12. By: Arjan Lejour
    Abstract: Innovation is a policy area in which the European Union (EU) has the competence to support, coordinate and supplement Member States’ policies according to the new Lisbon Treaty (2007). The Member States (MS) have the primacy in this area and the principles of subsidiarity and proportionality are applicable to decide whether EU support, coordination or supplementation of MS policies is justified.<BR> This paper presents a detailed subsidiarity test. It is applied to three innovation support measures as part of the Entrepreneurship and Innovation Programme of the Competitiveness and Innovation Framework Programme of the European Commission. These measures are access to finance for the start-ups and growth of SMEs and investment in innovation activities, networks in support of business and innovation-community grants (new Enterprise Europe Network), and the Intellectual Property Rights Helpdesk.
    Keywords: innovation policy; subsidiarity; European Union
    JEL: O38 H77 H87 F15
    Date: 2008–10
  13. By: Daron Acemoglu; Kostas Bimpikis; Asuman Ozdaglar
    Abstract: This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents may improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms. Each firm receives a private signal on the success probability of one of many potential research projects and decides when and which project to implement. A successful innovation can be copied by other firms. Symmetric equilibria (where actions do not depend on the identity of the firm) always involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous rather than staggered experimentation. The social cost of insufficient experimentation can be arbitrarily large. Appropriately-designed patents can implement the socially optimal allocation (in all equilibria). In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective. We also show that when signal quality differs across firms, the equilibrium may involve a nonmonotonicity, whereby players with stronger signals may experiment after those with weaker signals. We show that in this more general environment patents again encourage experimentation and reduce delays.
    JEL: D83 D92 O31
    Date: 2008–10
  14. By: Mishra, SK
    Abstract: Based on the bibliographical data available with the RePEc (Research Papers in Economics), the Internet Documents in Economics Access Service (IDEAS) publishes every month the up-dated academic rankings of different geographic regions (countries/states in the US). This paper raises the question whether the method used by the IDEAS/RePEc to obtain academic rankings of different regions in terms of the academic performance of economists associated with them can be considered optimal. It devises five different types of ranking procedure based on the principles of representation of numerically large and varied types of ranking criteria by a single index of overall ranking scores. Empirically, it uses the data published by the IDEAS for the month of September 2008. It is found that the overall ranking scores obtained by the IDEAS are almost optimal on the four (of the five) principles of representation. However, it is not so when the principle of representation is maximization of the minimal squared correlation of overall ranking scores with the constituent individual ranking scores. The overall ranking scores based on maximization of minimal squared correlation beget larger impact (weight) of a select few scientometric criteria such as h-index, download counts, and certain specific (co-authorship discounted) measures of impact-weighted citation and productivity of authors affiliated to the regions under consideration. As a consequence, it has some bias in favour of economically developed regions, while the overall ranking scores obtained by the IDEAS are slightly biased in favour of the economically less developed regions. The IDEAS rankings, therefore, have a tendency to discount for the disadvantages faced by the economists associated with the less privileged regions.
    Keywords: IDEAS; RePEc; Bibliometric; Scientometric; principles of representation; academic rankings; economics; impact factors; h-index; citation index; journal pages; global optimality; differential evolution; Principal Components Analysis
    JEL: C43 C63 C61 J24 A14
    Date: 2008–10–14

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