IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v19y2010i2p489-512.html
   My bibliography  Save this article

Dynamic Effects of Patent Policy on Sequential Innovation

Author

Listed:
  • Bonwoo Koo
  • Brian D. Wright

Abstract

When one patented innovation enables another, endogenous delay of the latter has important implications for the economics of patent life and scope, if licensing is negotiated ex post. Optimal patent life may be finite under competition, even if the royalty imposes no deadweight loss and there is no competitive dissipation of rent. Reduced scope of the first patent eliminates delay of costly enabled innovations, whether monopolized or competitive, and a combination of limited scope and infinite life can be optimal. If the second innovation is negotiated ex ante, its patentability can increase or decrease the first innovator's profit, depending on cost and market structure of the second innovation, and patent life.

Suggested Citation

  • Bonwoo Koo & Brian D. Wright, 2010. "Dynamic Effects of Patent Policy on Sequential Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 489-512, June.
    • Handle: RePEc:bla:jemstr:v:19:y:2010:i:2:p:489-512
    DOI: 10.1111/j.1530-9134.2010.00259.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1530-9134.2010.00259.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1530-9134.2010.00259.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    2. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
    3. R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3.
    4. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
    5. Richard Jefferson, 2006. "Science as Social Enterprise: The CAMBIA BiOS Initiative," Innovations: Technology, Governance, Globalization, MIT Press, vol. 1(4), pages 13-44, October.
    6. 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.
    7. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2007. "Secrecy versus patenting," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 22-42, March.
    8. GianCarlo Moschini & Oleg Yerokhin, 2008. "Patents, Research Exemption, and the Incentive for Sequential Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 379-412, June.
    9. Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer.
    10. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
    11. Chou Teyu & Haller Hans, 2007. "The Division of Profit in Sequential Innovation for Probabilistic Patents," Review of Law & Economics, De Gruyter, vol. 3(2), pages 581-609, December.
    12. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March.
    13. Marie Thursby & Richard Jensen, 2001. "Proofs and Prototypes for Sale: The Licensing of University Inventions," American Economic Review, American Economic Association, vol. 91(1), pages 240-259, March.
    14. Lei, Zhen & Juneja, Rakhi & Wright, Brian D, 2009. "Patents versus patenting: implications of intellectual property protection for biological research," MPRA Paper 34640, University Library of Munich, Germany.
    15. Hopenhayn, Hugo A & Mitchell, Matthew F, 2001. "Innovation Variety and Patent Breadth," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 152-166, Spring.
    16. Dechenaux, Emmanuel & Thursby, Marie & Thursby, Jerry, 2009. "Shirking, sharing risk and shelving: The role of university license contracts," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 80-91, January.
    17. Ted O'Donoghue & Suzanne Scotchmer & Jacques‐François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    18. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
    19. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
    20. Jerry G. Thursby & Marie C. Thursby, 2002. "Who Is Selling the Ivory Tower? Sources of Growth in University Licensing," Management Science, INFORMS, vol. 48(1), pages 90-104, January.
    21. Thursby, Jerry G & Jensen, Richard & Thursby, Marie C, 2001. "Objectives, Characteristics and Outcomes of University Licensing: A Survey of Major U.S. Universities," The Journal of Technology Transfer, Springer, vol. 26(1-2), pages 59-72, January.
    22. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Drivas, Kyriakos & Lei, Zhen & Wright, Brian D., 2018. "Application publication or confirmation of grant: Which matters more for academic technology transfer?," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 204-228.
    2. Lence, Sergio H. & Hayes, Dermot J. & Alston, Julian & Smith, J. Stephen C., 2015. "Intellectual Property in Plant Breeding: Comparing Different Levels and Forms of Protection," Staff General Research Papers Archive 38978, Iowa State University, Department of Economics.
    3. Lu, Louis Y.Y. & Liu, John S., 2016. "A novel approach to identify the major research themes and development trajectory: The case of patenting research," Technological Forecasting and Social Change, Elsevier, vol. 103(C), pages 71-82.
    4. Haejun Jeon, 2016. "Patent litigation and cross licensing with cumulative innovation," Journal of Economics, Springer, vol. 119(3), pages 179-218, November.
    5. Hong-Wen Tsai & Hui-Chung Che & Bo Bai, 2022. "Longer Patent Life Representing Higher Value? A Study on China Stock Market and China Patents," Bulletin of Applied Economics, Risk Market Journals, vol. 9(1), pages 115-136.
    6. Drivas, Kyriakos & Lei, Zhen & Wright, Brian D., 2017. "Academic patent licenses: Roadblocks or signposts for nonlicensee cumulative innovation?," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 282-303.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 315-380, Elsevier.
    2. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 51-78, National Bureau of Economic Research, Inc.
    3. Wright, Brian D. & Pardey, Philip G. & Nottenburg, Carol & Koo, Bonwoo, 2007. "Agricultural Innovation: Investments and Incentives," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 48, pages 2533-2603, Elsevier.
    4. Mohamed MABROUKI, 2018. "What Kind Of Intellectual Propfrty Regime Is More Favorable To Innovation: With Or Without A Patent?," Journal of Smart Economic Growth, , vol. 3(1), pages 77-95, Juin.
    5. Mabrouki, Mohamed, 2018. "Le brevet : un instrument efficace pour promouvoir l’innovation au profit de la croissance ou un mal nécessaire ? [Patent: an effective instrument to promote innovation for the benefit of growth or," MPRA Paper 85752, University Library of Munich, Germany.
    6. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635, December.
    7. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
    8. By Kenneth L. Judd & Karl Schmedders & Şevin Yeltekin, 2012. "Optimal Rules For Patent Races," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 23-52, February.
    9. Koo, Bonwoo & Wright, Brian D., 2002. "Economics of patenting a research tool: participation and productivity," EPTD discussion papers 88, International Food Policy Research Institute (IFPRI).
    10. GianCarlo Moschini & Oleg Yerokhin, 2008. "Patents, Research Exemption, and the Incentive for Sequential Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 379-412, June.
    11. Aoki, Reiko & Spiegel, Yossi, 2009. "Pre-grant patent publication and cumulative innovation," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 333-345, May.
    12. Jeon, Haejun, 2019. "Patent protection and R&D subsidy under asymmetric information," International Review of Economics & Finance, Elsevier, vol. 62(C), pages 332-354.
    13. Mitchell, Matthew & Zhang, Yuzhe, 2012. "Shared Rights and Technological Progress," MPRA Paper 36537, University Library of Munich, Germany.
    14. Llanes Gastón & Trento Stefano, 2011. "Anticommons and Optimal Patent Policy in a Model of Sequential Innovation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-27, August.
    15. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    16. Grönqvist, Charlotta, 2009. "Empirical studies on the private value of Finnish patents," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2009_041.
    17. Aoki, R. & Spiegel, Y., 1998. "Public Disclosure of Patent Applications, R&D, and Welfare," Papers 30-98, Tel Aviv.
    18. Langinier, Corinne, 2006. "Pool of Basic Patents and Follow-Up Innovations," Staff General Research Papers Archive 12647, Iowa State University, Department of Economics.
    19. Anja, Breitwieser & Neil, Foster, 2012. "Intellectual property rights, innovation and technology transfer: a survey," MPRA Paper 36094, University Library of Munich, Germany.
    20. Grönqvist, Charlotta, 2009. "Empirical studies on the private value of Finnish patents," Scientific Monographs, Bank of Finland, number 2009_041.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:19:y:2010:i:2:p:489-512. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.