nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2013‒04‒13
twelve papers chosen by
Giovanni Ramello
Universita' Amedeo Avogadro

  1. Music Piracy: Bad for Record Sales but Good for the iPod? By Leung, Tin Cheuk
  2. Trademark or patent? The effects of market structure, customer type and venture capital financing on start-ups' IP decisions By De Vries, G.A.; Pennings, H.P.G.; Block, J.H.
  3. A Tale of Two Standards: Patent Pools and Innovation in the Optical Disk Drive Industry By Kenneth Flamm
  4. Does Banning Side Payments in Patent Settlements Suffice to Fully Protect Consumers? By Ottoz Elisabetta; Cugno Franco
  5. Corporate taxation and the quality of research and development By Ernst, Christof; Richter, Katharina; Riedel, Nadine
  6. The Economic Value of Patent Portfolios By Gambardella, Alfonso; Harhoff, Dietmar; Verspagen, Bart
  7. The effect of patent litigation on firm performance: Evidence for Germany By Schliessler, Paula
  8. The Impacts of Post-TRIPS Patent Reforms on the Structure of Exports By Keith E. MASKUS; Lei YANG
  9. Rational parasites By Benoit, Jean-Pierre; Galbiati, Roberto; Henry, Emeric
  10. Different Rules of Legal-Cost Allocation and Patent Hold-Up By Ottoz Elisabetta; Cugno Franco
  11. The Division of Policy Research and Analysis at the National Science Foundation: Its Support of Research on the Returns to R&D By Hall, Michael J.; Layson, Stephen K.; Link, Albert N.
  12. Knowledge cumulability and complementarity in the knowledge generation function By Antonelli Cristiano; Colombelli Alessandra

  1. By: Leung, Tin Cheuk
    Abstract: Music piracy is a double-edged sword for the music industry. On the one hand, it hurts record sales. On the other hand, it increases sales of its complements. To quantify the effect of music piracy, I construct a unique survey data set and use a Bayesian method to estimate the demand for music and iPods, and find three things. First, music piracy decreases music sales by 24% to 42%. Second, music piracy contributes 12% to iPod sales. Finally, counterfactual experiments show that Apple's revenue could increase by $36 per student if music were free.
    Keywords: demand estimation, iPod, music piracy
    JEL: K42 L14 L82 O34
    Date: 2012
  2. By: De Vries, G.A.; Pennings, H.P.G.; Block, J.H.
    Abstract: We analyze the initial intellectual property (IP) right of 4,703 start-up entrants in the US, distinguishing between trademark and patent applications. The results show that start-ups are more likely to file for a trademark instead of a patent when entering into more competitive market structures. Further, we find that start-ups with a focus on distribution that serves end-consumers are more likely to file for a trademark and that start-ups that operate upstream and sell to other businesses are more likely to file for a patent. Lastly, the external influences on a start-up‟s management, such as the involvement of a venture capitalist (VC), affect IP applications. The increased incentive of VC-backed start-ups to become operational on the market makes them more likely to file initial IP in the form of a trademark rather than a patent. Among other factors, we control for R&D and advertising intensity in the industry and distinguish between more technical and more service-driven industries.
    Keywords: competition;intellectual property;trademarks;venture capital;patents
    Date: 2013–04–09
  3. By: Kenneth Flamm
    Abstract: The impact of patent pools on the rate and direction of technological change is an open question in both theoretical and empirical studies. Economic theory makes no unequivocal prediction. By contrast, empirical studies of patent pools, to date, have largely concluded that patent pools have been associated with reduced rates of technical innovation in the industries studied. This study differs from previous empirical studies of patent pools by focusing primarily on direct measures of innovation in product markets, rather than on indirect correlates of innovation (like patents), and by exploiting variation over time in how pools were organized in the same technology area. The paper analyzes the economic history of two successive sets of patent pools organized in substantially the same technological area -- the use of optical discs in data storage peripherals connected to computer systems. These two patent pool episodes differed significantly in their organizational and institutional details. These differences appear to have coincided with very different effects on the structure of product markets, and the rate of technical innovation in optical disc products. The analysis concludes that different approaches to pool organization and licensing policies implemented in these two patent pool examples were associated with very different outcomes. The clear implication is that organizational details matter: no single conclusion is likely to fit all cases. As theory seems to predict, the empirical effects of patent pools on innovation are likely to be ambiguous, dependent on the historical and institutional particulars of the pool and the industry it affects.
    JEL: O3 O31 O33 O34
    Date: 2013–03
  4. By: Ottoz Elisabetta; Cugno Franco (University of Turin)
    Abstract: By using a simple model of patent settlement, in this paper we show that even if side payments (negative fixed fees) are banned, a licensing agreement to settle a patent dispute may harm consumers in comparison with the expected outcome of the lawsuit. This may occur when the challenger’s expected return from litigation is low, that is when probabilistic damages are high relative to the challenger’s duopoly profits. Our model suggests that: (1) there may be large benefits to consumers from post-grant reexamination of commercially valuable patents -as stressed by Farrell and Shapiro (2008) in another context; and (2) the threat of punitive damages for patent infringement may harm consumers in the short run, perhaps without being of any help in providing the right incentive to innovate.
    Date: 2012–01
  5. By: Ernst, Christof; Richter, Katharina; Riedel, Nadine
    Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output (patent boxes). Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potential and innovation level. The effect is statistically signficant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality. --
    Keywords: corporate taxation,patent quality,micro data
    JEL: H3 H7 J5
    Date: 2013
  6. By: Gambardella, Alfonso; Harhoff, Dietmar; Verspagen, Bart
    Abstract: Patent holders may choose to protect innovations with single patents or to develop portfolios of multiple, related inventions. We propose a simple decision-making model in which patent-holders may allocate resources to either expanding the number of related patents or investing in higher value of patents in the portfolio. We estimate the derived value equation using portfolio value data from an inventor survey. We find that investments in individual inventions exhibit diminishing returns, and that much of the value of a portfolio depends on adding new inventions. These effects are less pronounced in high-techology industries, when the inventions rely on external information, and when the inventor holds a doctorate. We also find higher returns to an increase of the number of inventions when firms perceive patent protection to be strong. Thus, a higher number of inventions in a portfolio may reflect both genuine creation of value or stronger appropriability via patents.
    Keywords: intellectual property rights; inventors; patents; technical change
    JEL: L20 O31 O33 O34
    Date: 2013–01
  7. By: Schliessler, Paula
    Abstract: I analyse how patent litigation outcome in Germany affects the performance of the disputing firms by interpreting changes in a firm's credit rating as a proxy for changes in firm performance. The results match theoretical considerations on the functioning of the bifurcated German patent litigation system: The separation of litigation and invalidity decisions, resulting in invalidity decisions taking much longer than decisions on infringement, provides patent holders with a window of opportunity to enforce patents that may later be invalidated. This shifts a major share of the immediate risk to the defendant and allocates bargaining power to the plaintiff. The estimation results provide support for this incongruity. Plaintiffs on average profit from litigation while defendants agreeing upon a settlement deal lose as much as defendants losing in trial. I further show that small, inexperienced defendant firms are at a disadvantage when dealing with litigation. --
    Keywords: Patent,Patent Litigation,Credit Rating,Firm Value
    JEL: O34 K41
    Date: 2013
  8. By: Keith E. MASKUS; Lei YANG
    Abstract: We study the effects of reforms in the legal scope of patent rights (PRs) on the international pattern of sectoral exports, before and after implementation of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement at the World Trade Organization (WTO), in a generalized factor-proportions framework. We find that, conditional on factor endowments and intensities, a country with stronger PRs tends to have greater exports to the United States in patent-intensive sectors. These effects are significantly positive throughout the sample but are considerably larger in the post-TRIPS era. These impacts grow over time in developing economies, roughly in line with the implementation of TRIPS obligations. There is also evidence that changes over time in national PRs positively affect growth in exports. These results hold after controlling for alternative determinants of international trade and correcting for endogeneity.
    Date: 2013–04
  9. By: Benoit, Jean-Pierre; Galbiati, Roberto; Henry, Emeric
    Abstract: Understanding the impact of legal protection on investment is of major importance. This paper provides a framework for addressing this issue, and shows that investment may actually be higher in the absence of legal protection. Focusing on the application to innovation, in an environment where an innovator (the host) repeatedly faces the same imitators (parasites), we show that investment can take place even without patent protection, as parasites limit their imitation to preserve the innovator's incentives to invest. We show further that an innovator might be more active without legal protection: it is forced to increase its investment to keep the parasites satisfied and, thus, cooperative. We provide experimental evidence consistent with the theoretical results: in the experiment, investment levels with and without legal protection are comparable, and sometimes greater without patents. Our framework is general enough to apply to other situations such as investment in developing countries, commons' management and long-distance trade.
    Keywords: experiment; investment; patent; repeated games
    JEL: C91 K0 O3
    Date: 2013–02
  10. By: Ottoz Elisabetta; Cugno Franco (University of Turin)
    Abstract: We study how different rules of legal-cost allocation impact on negotiated royalties in an environment where patent hold-up is possible. The model assumes that the courts routinely grant stays of permanent injunctions to allow the infringers to redesign their products or deny injunctive reliefs outright. In these scenarios we consider the American system, where each party bear s its own costs, the British system, where the loser incurs all costs, and the system favoring the defendant, where the defendant pays its own costs if it loses and nothing otherwise. Our main conclusions are that when stayed injunctions are granted the system favoring the defendant provides the best results, while under denied injunctions the American system is preferable
    Date: 2012–10
  11. By: Hall, Michael J. (University of North Carolina at Greensboro, Department of Economics); Layson, Stephen K. (University of North Carolina at Greensboro, Department of Economics); Link, Albert N. (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The U.S. National Science Foundation’s (NSF’s) Division of Policy Research and Analysis (PRA) supported academic research related to, among many other things, measurement of the returns to private and public R&D, during the early 1980s. The findings from this body of research became a foundation for a number of technology and innovation policies promulgated in the aftermath of the U.S. productivity slowdown in the 1970s, and, as we suggest in this paper, a foundation for many contemporary technology and innovation policy initiatives. We argue that there are lessons to be learned from PRA’s successes from its sponsorship of research in this area, and we suggest one possible area of future emphasis for NSF’s on-going Science of Science and Innovation Policy (SciSIP) program.
    Keywords: Division of Policy Research and Analysis; National Science Foundation; Returns to R&D; Technology; Innovation; Science of Science and Innovation Policy
    JEL: O31 O32 O38
    Date: 2013–04–05
  12. By: Antonelli Cristiano; Colombelli Alessandra (University of Turin)
    Abstract: This paper explores the role of external knowledge and internal stocks of knowledge in the generation of new technological knowledge. It relies on the notion of recombination and brings together three concepts: the appreciation of current expenses in R&D activities; the analysis of the role of the stock of knowledge composition; the identification of the role of external knowledge available in the regional proximity. The empirical section is based upon a panel of companies listed on the main European financial markets for the period 1995–2006. The econometric analysis considers patents as a measure of the knowledge out put and, on the right hand side, next to R&D expenditures, the stock of knowledge internal and external to each firm. The results confirm that the stock of internal knowledge and the access to external knowledge play a key role in assessing the actual capability of each firm to generate new knowledge.
    Date: 2013–02

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