ex ante, always prefer full patent protection. The welfare ranking of the two intellectual property regimes, on the other hand, depends on the relative magnitudes of the costs of initial innovation and improvements." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Blackwell Publishing.">

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Patents, Research Exemption, and the Incentive for Sequential Innovation

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Author Info
GianCarlo Moschini
Oleg Yerokhin

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Abstract

"We develop a quality ladder model to study the R&D incentive impacts of intellectual property rights with a "research exemption" or "experimental use" provision. The innovation process is sequential and cumulative and takes place alongside production in an infinite-horizon setting. We solve the model under two distinct intellectual property regimes, characterize the properties of the relevant Markov perfect equilibria, and investigate the profit and welfare effects of the research exemption. We find that firms, ex ante, always prefer full patent protection. The welfare ranking of the two intellectual property regimes, on the other hand, depends on the relative magnitudes of the costs of initial innovation and improvements." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Blackwell Publishing.

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Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 2 (06)
Pages: 379-412
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Handle: RePEc:bla:jemstr:v:17:y:2008:i:2:p:379-412

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June. [Downloadable!] (restricted)
  2. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
  3. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 7(1), pages 1-32, 03. [Downloadable!] (restricted)
  4. Robert M. Hunt, 2004. "Patentability, Industry Structure, and Innovation," Journal of Industrial Economics, Blackwell Publishing, vol. 52(3), pages 401-425, 09. [Downloadable!] (restricted)
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  5. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1996. "Optimal Patent Design and the Diffusion of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 60-83, Spring. [Downloadable!] (restricted)
  6. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March. [Downloadable!] (restricted)
  7. Ted O'Donoghue, 1998. "A Patentability Requirement for Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 654-679, Winter. [Downloadable!] (restricted)
  8. GianCarlo Moschini, 2003. "Intellectual Property Rights and the World Trade Organization: Retrospect and Prospects," Center for Agricultural and Rural Development (CARD) Publications 03-wp334, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
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  9. Scotchmer, Suzanne, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter. [Downloadable!] (restricted)
  10. Denicolo, Vincenzo & Zanchettin, Piercarlo, 2002. "How should forward patent protection be provided?," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 801-827, June. [Downloadable!] (restricted)
  11. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer. [Downloadable!] (restricted)
  12. Raaj Kumar Sah & Joseph E. Stiglitz, 1987. "The Invariance of Market Innovation to the Number of Firms," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 98-108, Spring. [Downloadable!] (restricted)
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  1. Robert M. Hunt, 2007. "Economics and the design of patent systems," Working Papers 07-6, Federal Reserve Bank of Philadelphia. [Downloadable!]
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