nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2020‒09‒21
five papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. The effect of patent litigation insurance: Theory and evidence from NPEs By Ganglmair, Bernhard; Helmers, Christian; Love, Brian J.
  2. Inter-organisational patent opposition network: How companies form adversarial relationships By Tomomi Kito; Nagi Moriya; Junichi Yamanoi
  3. Royalty Taxation under Profit Shifting and Competition for FDI By Juranek, Steffen; Schindler, Dirk; Schneider, Andrea
  4. Discrimination against foreigners in the U.S. patent system By Gaetan de Rassenfosse; Reza Hosseini
  5. The Patent Buyout Price for Human Papilloma Virus (HPV) Vaccine and the Ratio of R&D Costs to the Patent Value By Mario Songane; Volker Grossmann

  1. By: Ganglmair, Bernhard; Helmers, Christian; Love, Brian J.
    Abstract: We analyze the extent to which private defensive litigation insurance deters patent assertion by non-practicing entities (NPEs). We study the effect that a patent-specific defensive insurance product, offered by a leading litigation insurer, had on the litigation behavior of insured patents' owners, all of which are NPEs. We first model the impact of defensive litigation insurance on the behavior of patent enforcers and accused infringers. We show that the availability of defensive litigation insurance can have an effect on how often patent enforcers will assert their patents. We confirm this result empirically showing that the insurance policy had a large, negative effect on the likelihood that a patent included in the policy was subsequently asserted relative to other patents held by the same NPEs and relative to patents held by other NPEs with portfolios that were entirely excluded from the insurance product. Our findings suggest that market-based mechanisms can deter so-called "patent trolling."
    Keywords: NPEs,patents,insurance,litigation
    JEL: G22 K41 O34
    Date: 2020
  2. By: Tomomi Kito; Nagi Moriya; Junichi Yamanoi
    Abstract: Much of the research on networks using patent data focuses on citations and the collaboration networks of inventors, hence regarding patents as a positive sign of invention. However, patenting is, most importantly, a strategic action used by companies to compete with each other. This study sheds light on inter-organisational adversarial relationships in patenting for the first time. We constructed and analysed the network of companies connected via patent opposition relationships that occurred between 1980 and 2018. A majority of the companies are directly or indirectly connected to each other and hence form the largest connected component. We found that in the network, many companies disapprove patents in various industrial sectors as well as those owned by foreign companies. The network exhibits heavy-tailed, power-law-like degree distribution and assortative mixing, making it an unusual type of topology. We further investigated the dynamics of the formation of this network by conducting a temporal network motif analysis, with patent co-ownership among the companies considered. By regarding opposition as a negative relationship and patent co-ownership as a positive relationship, we analysed where collaboration may occur in the opposition network and how such positive relationships would interact with negative relationships. The results identified the structurally imbalanced triadic motifs and the temporal patterns of the occurrence of triads formed by a mixture of positive and negative relationships. Our findings suggest that the mechanisms of the emergence of the inter-organisational adversarial relationships may differ from those of other types of negative relationships hence necessitating further research.
    Date: 2020–09
  3. By: Juranek, Steffen (Dept. of Business and Management Science, Norwegian School of Economics); Schindler, Dirk (Erasmus School of Economics, Erasmus University Rotterdam); Schneider, Andrea (Jönköping International Business School)
    Abstract: Multinational corporations increasingly use royalty payments for intellectual property rights to shift profits globally. This threatens not only the tax base of countries worldwide, it also affects the nature of competition for foreign direct investment (FDI). Against this background, our theoretical analysis suggests a surprising solution to the problem of curbing profit shifting without suffering major FDI losses: A strictly positive withholding tax on royalty payments is both the Pareto-efficient solution under international coordination and the optimal unilateral response. If internal debt is sufficiently responsive, governments can even implement Paretooptimal targeting. Then, the royalty tax closes the profit-shifting channel, while all competition for FDI is relegated to internal-debt regulation. Our results question the ban of royalty taxes in double tax treaties and the EU Interest and Royalty Directive.
    Keywords: Source tax on royalties; foreign direct investment; multinationals; profit shifting; internal debt; EU Interest and Royalty Directive
    JEL: F23 H25 O23
    Date: 2020–09–09
  4. By: Gaetan de Rassenfosse (Ecole polytechnique federale de Lausanne); Reza Hosseini (Ecole polytechnique federale de Lausanne)
    Abstract: Inventions of foreign origin are about ten percentage points less likely to be granted a U.S. patent than domestic inventions. An empirical analysis of 1.5 million U.S. patent applications identifies three systematic differences between foreign and domestic patent applications that partly explain this bias. They include differences in patent agents, the financial resources of the applicants, and the level of effort that applicants put into the prosecution process. We find no evidence of disparate treatment (‘intentional discrimination’) of foreigners. Instead, our evidence points to a disparate impact (‘unintentional discrimination’) of the U.S. patent system on foreign inventors. Our results suggest unequal access to the patent system for foreigners compared to locals (but also for small U.S. firms). Giving examiners the power of (truly) rejecting a patent application may be one solution to level the playing field between foreigners and locals, but also between large and small firms.
    Keywords: foreign bias; discrimination; disparate impact; national treatment principle; patent system
    JEL: O34 K11 F52
    Date: 2020–09
  5. By: Mario Songane; Volker Grossmann
    Abstract: Human papillomavirus (HPV) is responsible for almost all of the 570,000 new cases of cervical cancer and approximately 311,000 deaths per year. HPV vaccination is an integral component of the World Health Organization’s (WHO) global strategy to fight the disease. However, high vaccine prices enforced through patent protection are limiting vaccine expansion, particularly in low- and middle-income countries. By limiting market power, patent buyouts could reduce vaccine prices and raise HPV vaccination rates while keeping innovation incentives. We estimate the global patent buyout price as the present discounted value (PDV) of the future profit stream over the remaining patent length for Merck’s HPV vaccines (Gardasil-4 and 9), which hold 87% of the global HPV vaccine market, in the range of US$ 15.6–27.7 billion (in 2018 US$). The estimated PDV of the profit stream since market introduction amounts to US$ 17.8–42.8 billion and the estimated R&D cost to US$ 1.05–1.21 billion. Thus, we arrive at a ratio of R&D costs to the patent value of the order of 2.5–6.8%. We relate this figure to typical estimates of the probability of success (POS) for clinical trials of vaccines to discuss if patent protection provides Merck with extraordinarily strong price setting power.
    Keywords: Human Papilloma Virus (HPV) vaccine, market power, patent buyout price, patent value, R&D costs
    JEL: I18 L12 L65
    Date: 2020

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