nep-ipr New Economics Papers
on Intellectual Property Rights
Issue of 2023‒02‒13
four papers chosen by
Giovanni Ramello
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Investment and Patent Licensing in the Value Chain By Gerard Llobet; Damien Neven
  2. Omnia Juncta in Uno*: foreign powers and trademark protection in Shanghai's concession era By Alfaro, Laura; Bao, Cathy; Chen, Maggie X.; Hong, Junjie; Steinwender, Claudia
  3. The Impact of Corporate Climate Action on Financial Markets: Evidence from Climate-Related Patents By Hege, Ulrich; Pouget, Sébastien; Zhang, Yifei
  4. Price vs Market Share with Royalty Licensing: Incomplete Adoption of a Superior Technology with Heterogeneous Firms By Luca Sandrini

  1. By: Gerard Llobet (CEPR); Damien Neven (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: At which stage in the production chain should patent licensing takes place? In this paper we show that under realistic circumstances a patent holder would be better off by licensing downstream. This occurs when the licensing revenue can depend on the downstream value of the product either directly or through the use of ad-valorem royalties. We show that the results are similar when, instead, we assume that the downstream licensee is less informed about the validity of the patent. In most cases, downstream licensing increases allocative efficiency. However, it might reduce the incentives to invest by the manufacturers and thereby reduce welfare. We characterize the circumstances under which a conflict arises between the stage at which patent holders prefer to license their technology and the stage at which it is optimal from a social standpoint that licensing takes place.
    Keywords: Royalty Neutrality; Standard Setting Organizations; Patent Licensing; R&D Investment.
    JEL: L15 L24 O31 O24
    Date: 2022–12–22
  2. By: Alfaro, Laura; Bao, Cathy; Chen, Maggie X.; Hong, Junjie; Steinwender, Claudia
    Abstract: We investigate how firms and markets adapt to trademark protection, an extensively used but under-examined form of IP protection to address asymmetric information, by exploring a historical precedent: China's trademark law of 1923. Exploiting unique, newly digitized firm-employee and firm-agent datasets from Shanghai in 1872-1941, we show that the trademark law, established as an unanticipated and Western-disapproved response to end foreign privileges in China, shaped firm dynamics and relationships on all sides of trade-mark conflicts. Western firms with greater dependence on trademark protection grew and raised brand investment, while Japanese businesses, most frequently accused of counterfeiting, contracted despite attempts to build their own brands. The trademark law also fostered relationships with domestic intermediaries, both within and outside the boundaries of Western firms, and the growth of the Chinese intermediary sector. At the market level, the trademark law did not reduce competition or raise brand prices, leading to a coexistence of trademarks and competitive markets and ultimately gains in consumer welfare. A comparison with previous attempts by foreign powers-such as extraterritorial rights and bilateral treaties-shows that the alternative institutions were broadly unsuccessful. *Omnia Juncta in Uno ("All Joined in One") was the Latin motto on the municipal seal of the Shanghai International Settlement (1843-1941) and signified the joint governance of foreign powers in the settlement.
    Keywords: trademark; firm dynamics; intermediaries; competition; IP institutions
    JEL: K11 D20 O10 O30 N40 F20
    Date: 2022–02–02
  3. By: Hege, Ulrich; Pouget, Sébastien; Zhang, Yifei
    Abstract: We study the impact of climate-related patents on financial markets. We exploit the quasi-random assignment of patent examiners with different degrees of leniency as an exogenous shock in patent approvals to allow for causal interpretations. We find that firms with more lucky climate-related patents subsequently display higher positive cumulative abnormal stock returns and enjoy a lower cost of capital, compared with similarly innovative but unlucky firms. These results hold especially during periods of high attention towards climate change and for initial climate patent granting. Firms with more lucky climate-related patents also exhibit better environmental ratings and attract more responsible institutional investors. OLS regressions show that firms developing more climate-related technologies reduce more direct carbon emission intensity.
    Keywords: climate-related patents; green patents; examiner leniency; climate change; implied cost of capital; ESG ratings; responsible investors; CO2 emissions.
    JEL: G11 G23 G24 O34
    Date: 2023–01
  4. By: Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics)
    Abstract: This article shows that the usual result of full adoption of a superior technology induced by pure royalty licensing may not hold when firms have different production technologies. By modeling a licensing game with an external innovator offering per-unit royalty contracts to downstream firms, this article shows that full adoption of the innovation occurs only if i) the new technology is sufficiently more efficient than the best one available in the market or ii) if the firms have similar efficiency levels. Moreover, I disentangle two distinct forces that influence the innovator's choice: a price effect (PE) and a market share effect (MSE). The former highlight the asymmetry in willingness to pay for the new technology. The inefficient firms, which benefit the most from the cost-reducing innovation, are willing to pay a higher price than their efficient rivals to become licensees. The latter illustrates the innovator's aim to maximize the volume of royalties collected by licensing to many firms. When PE dominates MSE, the patent holder sets a higher royalty rate and attracts fewer, less efficient firms. Otherwise, if MSE dominates, the patent holder lowers the royalty rate and attracts more firms to reach as many consumers as possible. From a policy perspective, I show that royalty licensing improves consumer surplus and that the positive effect increases with the number of licensees.
    Keywords: Innovation; Licensing; Royalties; Price Effect; Market Share Effect
    JEL: L13 L24 O31
    Date: 2023–01

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