nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2014‒07‒21
six papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Patent statistics: a good indicator for innovation in China? Assessment of impacts of patent subsidy programs on patent quality By Dang, Jangwei; Motohashi, Kazuyuki
  2. Do "Reverse Payment" Settlements of Brand-Generic Patent Disputes in the Pharmaceutical Industry Constitute an Anticompetitive Pay for Delay? By Keith M. Drake; Martha A. Starr; Thomas McGuire
  3. Innovation in the Service Sector and the Role of Patents and Trade Secrets By Masayuki Morikawa
  4. Patent Expiration and Competition: A dynamic limit price model By Anastasios Papanastasiou
  5. Do Pharmacists Buy Bayer? Informed Shoppers and the Brand Premium By Bart J. Bronnenberg; Jean-Pierre Dubé; Matthew Gentzkow; Jesse M. Shapiro
  6. Dilemma in Individual Collaboration for Invention: Should We be Similar or Diverse in Knowledge? By Huo, Dong; Motohashi, Kazuyuki

  1. By: Dang, Jangwei; Motohashi, Kazuyuki
    Abstract: This paper investigates whether patent subsidy programs aimed at promoting regional innovations have aroused a large number of low-quality applications in China and created biased patent statistics as an indicator for innovations. We found that patent filing fee subsidies encouraged filing of low-quality patent, resulting in a decreased grant rate. Though reward conditioned on grants increased patent grant rate, it also brought patents with narrow claim breadth. Our empirical results confirmed a general concern that patent subsidies have side effects in encouraging patent applications of low quality or low value. However, the patent subsidy programs does not affect the trend of granted patents, particularly for those applied by firms. Therefore, while the surge of patent applications has upward biases as an innovation indicator, increases in granted patents can be explained by uprising of technological capability at enterprise sector in China.
    Keywords: patent, subsidy, quality, China
    JEL: O34 O38
    Date: 2013–11
  2. By: Keith M. Drake; Martha A. Starr; Thomas McGuire
    Abstract: Brand and generic drug manufacturers frequently settle patent litigation on terms that include a payment to the generic manufacturer along with a specified date at which the generic would enter the market. The Federal Trade Commission contends that these agreements extend the brand’s market exclusivity and amount to anticompetitive divisions of the market. The parties involved defend the settlements as normal business agreements that reduce business risk associated with litigation. The anticompetitive hypothesis implies brand stock prices should rise with announcement of the settlement. We classify 68 brand-generic settlements from 1993 to the present into those with and without an indication of a “reverse payment” from the brand to the generic, and conduct an event study of the announcement of the patent settlements on the stock price of the brand. For settlements with an indication of a reverse payment, brand stock prices rise on average 6% at the announcement. A “control group” of brand-generic settlements without indication of a reverse payment had no significant effect on the brands’ stock prices. Our results support the hypothesis that settlements with a reverse payment increase the expected profits of the brand manufacturer and are anticompetitive.
    JEL: I11 L41 L65
    Date: 2014–07
  3. By: Masayuki Morikawa
    Abstract: This paper, using Japanese firm-level data, presents findings about innovative activities in the service sector and the role of patents and trade secrets on innovation. According to the analysis, first, service firms have fewer product innovations than do manufacturing firms, but the productivity of innovative service firms is very high. Second, service firms have a low propensity for holding patents, but their holding of trade secrets is comparable to that of the manufacturing firms. Third, patents and trade secrets have positive relationships with product innovations, and the effects are quantitatively similar in magnitude in both the manufacturing and the service sectors. On the other hand, a positive relationship between trade secrets and process innovations is found only in the manufacturing sector. These results suggest a pivotal role of the law protecting trade secrets on innovation and productivity growth in the service sector.
    JEL: O31 O34 L80
    Date: 2014
  4. By: Anastasios Papanastasiou
    Abstract: We develop a dynamic model to explore the optimal pricing strategy of a monopolist that faces potential market entry at a given point in time. By engaging in promotional activities, the dominant firm may increase future demand for the product, while by charging below a limit price it can prevent competition from entering the market. Our analysis suggests that the optimal path for price and advertisement depends on the price elasticity of demand and the duration of monopoly life. Relating our model to the market for pharmaceuticals, we establish conditions that would give rise to a Generics Competition Paradox (GCP) and discuss how these conditions are linked to the existing theories that attempt to explain the GCP.
    Keywords: Monopoly, generic competition, brand-name drugs, limit price, price elasticity of demand
    JEL: D21 D42 I11 L12 C61
    Date: 2014–05
  5. By: Bart J. Bronnenberg; Jean-Pierre Dubé; Matthew Gentzkow; Jesse M. Shapiro
    Abstract: We estimate the effect of information on consumers' willingness to pay for national brands in physically homogeneous product categories. We measure consumer information using education, occupation, and a survey-based measure of product knowledge. In a detailed case study of headache remedies we find that more informed consumers are less likely to pay extra to buy national brands, with pharmacists choosing them over store brands only 9 percent of the time, compared to 26 percent of the time for the average consumer. In a similar case study of pantry staples such as salt and sugar, we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar non-chefs. We extend our analysis to cover 50 retail health categories and 241 food and drink categories and use the resulting estimates to fit a stylized model of demand and pricing. The model allows us to quantify the extent to which brand premia result from misinformation, and the way more accurate beliefs would change the division of surplus among manufacturers, retailers, and consumers.
    JEL: D12 D83 L66
    Date: 2014–07
  6. By: Huo, Dong; Motohashi, Kazuyuki
    Abstract: This study integrates theories relevant to collaborative knowledge creation and provides evidence to discover effects of knowledge diversity on collaborative knowledge creation. The analysis uses a sample comprising 38,500 granted U.S. utility patents involving two collaborating inventors, from application year 1991 to 2005. Interindividual knowledge diversity is thought to affect collaborative knowledge creation in three dimensions: increasing probability of excellent ideas, increasing probability of disagreements, and lowering knowledge assimilation. Furthermore, these impacts are conditional on two proposed moderators: technology scope and affiliation scope. Empirical evidence supports the positive effect of knowledge diversity weakening as the scope of technology broadens. The effect also differs depending upon whether the collaboration occurs between organizations, within one organization, or outside any organization.
    Keywords: invention, collaboration, knowledge diversity, knowledge quality, technology scope, affiliation scope
    JEL: O31 O32
    Date: 2014–02

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