nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2021‒05‒03
five papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. The reward and contract theories of patents in a model of endogenous growth By Klein, Michael A
  2. Bargaining Failure and Freedom to Operate: Re-evaluating the Effect of Patents on Cumulative Innovation By Gaessler, Fabian; Harhoff, Dietmar; Sorg, Stefan
  3. Induced automation: evidence from firm-level patent data By Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
  4. Patent Boxes and the Success Rate of Applications By Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
  5. A Preliminary Index of SARS-CoV-2 Diagnostic Testing Patents By MAVRIDIS, Dimitrios; CSÉFALVAY, Zoltan; GKOTSIS, Petros; POTTERS, Lesley

  1. By: Klein, Michael A
    Abstract: I develop a general equilibrium model of endogenous growth to jointly analyze two distinct theories of the patent system’s social value: (1) that patents stimulate innovation by enhancing private incentives to invest in R&D (reward theory) and (2) that patents disseminate technical information into the public domain through disclosure requirements (contract theory). The model features endogenous innovator selection into patents versus secrecy based on heterogenous innovation size, the effective cost of disclosure, and expected licensing revenue from holding a patent. Innovation is cumulative, patent rights overlap across industries, and new innovator’s pay mandatory licensing fees to a subset of previous innovators if those innovators hold a patent. The economy’s endogenous patent propensity determines each new innovator’s licensing burden, consistent with the concept of patent thickets. The model captures the inherent tension between the two objectives of the patent system and highlights novel, competing effects of patent policy on both economic growth and social welfare.
    Keywords: Innovation; Patent policy; Patent thickets; Trade secrets; Endogenous growth
    JEL: O31 O34 O43
    Date: 2021–04–30
  2. By: Gaessler, Fabian (MPI-IC Munich); Harhoff, Dietmar (MPI-IC Munich); Sorg, Stefan (MPI-IC Munich)
    Abstract: We investigate the causal effect of patent rights on cumulative innovation, using large-scale data that approximate the patent universe in its technological and economic variety. We introduce a novel instrumental variable for patent invalidation that exploits personnel scarcity in post-grant opposition at the European Patent Office. We find that patent invalidation leads to a highly significant and sizeable increase of follow-on inventions. The effect is driven by cases where the removal of the individual exclusion right creates substantial freedom to operate for third parties. Importantly, our results suggest that bargaining failure between original and follow-on innovators is not limited to environments commonly associated with high transaction costs.
    Keywords: cumulative innovation; patents; bargaining failure; freedom to operate; opposition;
    JEL: K41 L24 O31 O32 O33 O34
    Date: 2019–12–16
  3. By: Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
    Abstract: Do higher wages lead to more automation innovation? To answer this question, we first use the frequency of certain keywords in patent text to create a new measure of automation innovation in machinery. We show that our measure is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of low- and high-skill wages. In a firm-level panel analysis, we find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 5. Placebo regressions show that the effect is specific to automation innovations. Finally, we focus on a specific labor market shock, the German Hartz reforms, and show that they reduced automation innovations by those non-German firms relatively more exposed to Germany.
    Keywords: Automation, innovation, patents, income inequality
    JEL: O31 O33 J20
    Date: 2021–04
  4. By: Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
    Abstract: Patent boxes significantly reduce the corporate tax rate applied to income earned from a patent. This incentivizes firms to increase the likelihood of a patent application being granted by creating more novel research and using more successful legal representation when filing the application. Conversely, it supports submitting applications for marginally novel innovations that otherwise would not have been submitted, lowering the probability of success. We use data from applications to the European Patent Office from 1978 to 2019 and find that the introduction of a patent box increases the average success rate of applications from large, corporate innovators by 6.9 percentage points. This impact only materializes two years after a patent box takes effect, suggesting that improved research effort is the dominant response by firms. Therefore patent boxes may help to increase innovation novelty and improve the overall quality of research.
    Keywords: Patent Box; Patents; Application Success; Corporate Taxation
    JEL: H25 O31 O32
    Date: 2021–04
  5. By: MAVRIDIS, Dimitrios; CSÉFALVAY, Zoltan; GKOTSIS, Petros; POTTERS, Lesley (European Commission - JRC)
    Abstract: Diagnostic testing for COVID-19 is an important part of the management of the current pandemic. In this paper we reason that previous knowledge in diagnostic testing for Coronaviruses (such as MERS-Cov and SARS-Cov) might prove critical to the development and deployment for COVID-19 testing. By extracting keywords from this knowledge, we construct an indicator of inventive activity in the area of Coronavirus diagnostic tests and analyse this over time and measure where this knowledge is located in the world, with potentially important implications for the development and deployment of diagnostics for SARS-CoV-2.
    Keywords: diagnostic testing, SARS-CoV2, pandemic, coronavirus, patents, patent analysis
    Date: 2021–04

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