nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2009‒10‒24
seven papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Patent Office in innovation policy: Nobody's perfect By Bernard Caillaud; Anne Duchêne
  2. International Cooperation in Pharmaceutical Research By Anna Rita Bennato; Laura Magazzini
  3. Weak IPR and Imitation in the South and International Exhaustion of Patent Rights in the North for Innovated Drugs: A Policy Game By Rajat Acharyya; Maria D.C. Garcia-Alonso
  4. Software Innovation and the Open Source threat By German Lambardi
  5. Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base By Peng Huang; Marco Ceccagnoli; Chris Forman; D.J. Wu
  6. Institutional Influences on strategic entrepreneurial Behaviours By Erkko Autio; Zoltan Acs
  7. The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter? By Manuela Gussoni - Andrea Mangani

  1. By: Bernard Caillaud; Anne Duchêne
    Abstract: The number of patent applications and "bad" patents issued has been rising rapidly in recent years. Based on this trend, we study the overload problem within the Patent Office and its consequences on the firms' R&D incentives. We assume that the examination process of patent applications is imperfect, and that its quality is poorer under congestion. Depend- ing on policy instruments such as submission fees and the toughness of the non-obviousness requirement, the system may result in a high-R&D equilibrium, in which firms self-select in their patent applications, or in an equilibrium with low R&D, opportunistic patent applications and the issuance of bad patents. Multiple equilibria often coexist, which deeply undermines the effectiveness of policy instruments. We investigate the robustness of our conclusions as to how the value of patent protection is formalized, taking into consideration the introduction of a penalty system for rejected patent applications, as well as the role of commitment to a given IP protection policy.
    Date: 2009
  2. By: Anna Rita Bennato (University of Rome “Tor Vergata”, Department of Economics, and University of Bristol); Laura Magazzini (Department of Economics (University of Verona))
    Abstract: Since 1990 the global patent regime strengthened dramatically. The introduction of the Trade-Related Aspect of Intellectual Property Rights (TRIPS) agreement in 1995 has represented an important evolution into the Intellectual Property Rights (IPRs) regime. On January 1, 2005 the TRIPS regulations about the new patent regime came into force in all developing countries, imposing all WTO members patent protection in all productive areas, including pharmaceutical products (with the exception of least-developed members of WTO, for which enforcement of product patent protection and undisclosed information rights for pharmaceuticals is postponed to 2016). Despite the attention devoted to the issue by the theoretical literature, scattered empirical work is available at date. We aim at studying whether the new patent regime has stimulated international cooperation on innovative activities between WTO members, focusing on less developed countries. In particular, we adopt a gravity framework in order to examine the impact of the level of enforcement of property rights on bilateral flows of pharmaceutical knowledge. The analysis is conducted using data from the PatentScope and ISI Web of knowledge, and results provide a sound test of conflicting theories about the effect of TRIPS enforcement on technology transfer.
    Keywords: IPRs, pharmaceutical products, R&D co-operation
    JEL: F13 O34 O57
    Date: 2009–10
  3. By: Rajat Acharyya; Maria D.C. Garcia-Alonso
    Abstract: We consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR) and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market based discrimination (MBD). We show that, for a moderately high imitation cost, both (Strict IPR, Parallel Imports) and (Weak IPR, MBD) emerge as the Subgame Perfect Nash Equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (Weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (Strict IPR, PI), the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights.
    Keywords: Patent protection; TRIPS; innovation; imitation; Parallel Imports; Pharmaceuticals
    JEL: D4 L1 I1
    Date: 2009–10
  4. By: German Lambardi (Toulouse School of Economics)
    Abstract: In this paper I study how innovation investment in a software duopoly is affected by the fact that one of the firms is, or might become Open Source. Firms can either be proprietary source (PS) or open source (OS) and have different initial technological levels. An OS firm is a for profit organization whose basic software is OS and it is distributed for free. The OS firm, however, is able to make profits from selling complementary software and, on the cost side, it receives development help from a community of users. I first compare a duopoly composed by two PS firms with a mixed duopoly of a PS and OS firm and I find that a PS duopoly might generate more innovation than a mixed duopoly if the initial technological gap between firms is small. However if this gap is large, a PS duopoly generates less innovation than a mixed duopoly. I then extend the setting to allow PS firms to switch to OS or to remain PS. A PS firm wants to become OS if it gets behind enough in the technological race against a competitor. I find that the outside option to become OS might soften competition on innovation since the technological leader prefers to reduce his innovation investment to avoid the OS switch of the follower. Therefore, although the switch to OS could generate higher investment levels ex-post it might generate lower investment ex-ante. In this context I find that a government subsidy to OS firms could be potentially harmful for innovation.
    Keywords: Software Market, Open Source, Innovation Incentives
    JEL: L13 L17 O31 O38
    Date: 2009–09
  5. By: Peng Huang (College of Management, Georgia Tech); Marco Ceccagnoli (College of Management, Georgia Tech); Chris Forman (College of Management, Georgia Tech); D.J. Wu (College of Management, Georgia Tech)
    Abstract: In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to partnership formation, and ISVs use these two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater competition in downstream product markets between the ISV and the platform owner is associated with a lower likelihood of partnership formation, while the platform’s penetration into the ISV’s target industries is positively associated with the propensity to partner. The results highlight the role of innovation appropriation, downstream complementary capabilities, and collaborative competition in the formation of a platform ecosystem.
    Keywords: platform ecosystem, partnership, intellectual property rights, downstream capabilities
    JEL: L26 L86 O33 O34
    Date: 2009–09
  6. By: Erkko Autio (Imperial College Business School); Zoltan Acs (George Mason University)
    Abstract: The purpose of this paper is to examine the existence of cross-level moderating effects between national appropriability conditions, individual level predictors and entrepreneurial growth aspirations. We test a multi-level model that connects the determinants of strategic resource allocation decisions at the individual level with the strength of the intellectual property rights regime at the national level. The results suggest that the strengths of the intellectual property regime will moderate negatively the relationship between an individual's education and her growth aspirations and moderate positively the relationship between an individual's income and her growth aspirations. The findings support claims that strategic entrepreneurial behavior cannot be fully understood without giving attention to the context in which those behaviors are observed.
    Keywords: strategic entrepreneurship, multi-level analysis, intellectual property protection, growth aspirations
    JEL: L26 J24 C3 M13 F5
    Date: 2009–10–05
  7. By: Manuela Gussoni - Andrea Mangani
    Abstract: This paper provides a theoretical and empirical framework to explore how public funding affects firms' R&D investments depending on their engagement in horizontal R&D cooperations and different levels of ap- propriability conditions within the economy. It assumes firms' Cournot-Nash behavior in the choice of the optimal R&D investment level and provides empirical evidence in support of the theoretical ¯ndings using data on Spain and Germany from the Third Community Innovation Survey. Theoretical and empirical re- sults suggest that firms' cooperative behaviour and the appropriability conditions affect the relationship between public funding for innova- tion and R&D investments.
    Keywords: R&D cooperatives; subsidies;knowledge spillovers; innovation.
    JEL: O32 H20 L10 D43 D78
    Date: 2009–10–15

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