nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2017‒10‒29
seven papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Can Competition Extend the Golden Age of Antibiotics? By Eswaran, Mukesh; Gallini, Nancy
  2. Firm Innovation under Import Competition from Low-Wage Countries By Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
  3. How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree By Martin Watzinger; Thomas A. Fackler; Markus Nagler; Monika Schnitzer
  4. Price controls versus compulsory licensing: effects on patent-holders and consumers By Eric W Bond; Kamal Saggi
  5. Patent Validity Challenges and The America Invents Act By Talia Bar; Brendan Costello
  6. Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms By Schwab, Thomas; Todtenhaupt, Maximilian
  7. Follow The Money: Piracy and Online Advertising By Batikas, Michail; Claussen, Jörg; Peukert, Christian

  1. By: Eswaran, Mukesh; Gallini, Nancy
    Abstract: Countries world wide face an imminent global health crisis. As resistant bacteria render the current stock of antibiotics ineffective and the pipeline of back-up drugs runs dry, pharmaceutical companies are abandoning their research in antibiotics. In this paper we ask: Why are pharmaceutical companies closing antibiotic research labs when the stakes are so high? Implementing a simple dynamic framework, we show that the environment for new antibiotics is relatively hostile, compared to other medicines, due to market failures that result in excessive use and acceleration of natural selection. The analysis reveals, however, that increased competition between drugs can actually slow down the rate of resistance without, in some cases, diluting research incentives. This result, which is bolstered by scientific evidence, arises from a fundamental interplay between economic and biological externalities. We propose a patent-antitrust regime for aligning drug research and usage with those of the social planner, which implies an alternative justification of the patent system.
    Keywords: antibiotic resistence, market competition, R&D incentives, patents
    JEL: I11 I12 I13 O31 O38
    Date: 2017–10–19
  2. By: Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
    Abstract: In recent years, manufacturing firms in the United States have faced increasing import competition from low-wage countries, especially China. Does this competition hurt or help innovation by firms? This paper studies the effect of the surge in imports from China on innovation in the US manufacturing sector. We combine patent, firm and trade data during 1990-2006 for US publicly-listed firms in the Compustat dataset. We find consistent evidence that Chinese import competition had a positive effect on firm innovation, as measured by citation-weighted patent applications. This positive effect persists when we instrument import competition in the US by using Chinese import penetration in the United Kingdom. Next we investigate this relationship between import competition and innovation by considering industry and firm heterogeneity. We find that firms in low-tech industries and those with a lower degree of product differentiation show a significant positive response to import competition. Firms with a higher capital intensity and lower labor productivity also exhibit a greater response. These results are shown to be robust to a variety of measures for import penetration and innovation.
    Keywords: import competition, innovation, international trade, manufacturing firms, patents
    JEL: F10 F14 O31 O32
    Date: 2017
  3. By: Martin Watzinger; Thomas A. Fackler; Markus Nagler; Monika Schnitzer
    Abstract: We study the 1956 consent decree against the Bell System to investigate whether patents held by a dominant firm are harmful for innovation and if so, whether compulsory licensing can provide an effective remedy. The consent decree settled an antitrust lawsuit that charged Bell with having foreclosed the market for telecommunications equipment. The decree forced Bell to license all its existing patents royalty-free. The compulsory licensing increased follow-on innovation building on Bell patents by 17%. This effect is driven mainly by young and small companies. Yet, innovation increased only outside the telecommunications equipment industry, suggesting that compulsory licensing without structural remedies is ineffective in ending market foreclosure.
    Keywords: innovation, antitrust, intellectual property, compulsory licensing
    JEL: O30 O33 O34 K21 L40
    Date: 2017
  4. By: Eric W Bond (Vanderbilt University); Kamal Saggi (Vanderbilt University)
    Abstract: We extend the model of Bond and Saggi (2014) in which a patent-holder chooses between direct entry and the voluntary licensing of its technology to a local firm in a developing country. We compare two scenarios: one where the country imposes a price control on the patent-holder and another where it issues a compulsory license to the local firm if the patent-holder decides to neither enter nor license its technology voluntarily. A price control makes entry less attractive to the patent-holder relative to voluntary licensing whereas the threat of compulsory licensing has the opposite effect. While a price control always makes the patent-holder worse off, the option of compulsory licensing can sometimes be to its advantage.
    Keywords: Patented Goods, Compulsory Licensing, Voluntary Licensing, Price Controls, Quality, Welfare
    JEL: F1
    Date: 2017–10–21
  5. By: Talia Bar (University of Connecticut); Brendan Costello (Yale Law School)
    Abstract: Patent reexamination or patent review systems can lower the cost of challenging patent validity and help improve patent quality. We empirically investigate post-grant patent validity challenges at the U.S. Patent and Trademark Office, and how the 2011 America Invents Act affected them. We compare the inter partes reexamination procedure with the inter partes review procedure that replaced it after the reform. To identify the effect of the policy changes, we exploit the fact that patents filed before the act passed, but granted after the new inter partes review system took effect, are not eligible for reexamination in the old system. We find that more patent challenges end with a patentee win after the policy change. Still, at least one patent claim is canceled in more than 60% of the cases. Litigated patents issued to small entities more often had at least one claim canceled compared to other patents.
    Keywords: Patent; Inter Partes Reexamination; Inter Partes Review; The America Invents Act; Post Grant Challenge, Patent Validity
    JEL: O34 K10 K23
    Date: 2017–10
  6. By: Schwab, Thomas; Todtenhaupt, Maximilian
    Abstract: We analyze cross-border externalities of patent box regimes. Tax cuts in one location of a MNE reduce the user cost of capital for the whole group if they have no nexus requirement. This spillover effect of foreign tax cuts raises domestic R&D activity. The implementation of a patent box in an affiliate country of a MNE, increases domestic R&D by about 1% per implied tax rate differential. Furthermore, patent boxes generate negative spillovers on average patent quality.
    JEL: H23
    Date: 2017
  7. By: Batikas, Michail; Claussen, Jörg; Peukert, Christian
    Abstract: Online copyright enforcement, in the form of either direct action against the supply- side (via website shutdowns) or the demand-side (via individual lawsuits against users), has not been very effective in reducing piracy. Regulators have therefore put forward the so called “follow the money" approach. Because the main source of revenue for infringing websites often comes from online advertising, the idea is that cutting access to advertisers could lower the financial incentives for website owners. In this paper, we aim to provide systematic evidence on the effectiveness of such a policy. We collect data on the advertising services associated with a large number of piracy websites and corresponding set of legitimate \placebo" websites before and after the _rst steps of a self-regulatory effort in the European Union went in place. Preliminary results suggest that advertising services indeed reduce their activities on piracy websites, however only those that are most likely to be directly affected by the regulation. We further provide evidence that some advertising services that did not cater to the piracy market before, start to do so { perhaps as a strategic response.
    Keywords: Piracy,Copyright Enforcement,Online Advertising
    JEL: L82 M37 D83
    Date: 2017

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