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A Patentability Requirement for Sequential Innovation

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Author Info
Ted O'Donoghue
Abstract

This article investigates patent protection for a long sequence of innovations where firms repeatedly supersede each other. Incentives for R&D can be insufficient if successful firms earn market profit only until competitors achieve something better. To correct this problem, patents must provide protection against future innovators. This article proposes using a patentability requirement -- a minimum innovation size required for patents. A patentability requirement can stimulate R&D investment and increase dynamic efficiency. Intuitively, requiring firms to pursue larger innovations prolongs market incumbency because larger innovations are harder to achieve, and longer market incumbency implies an increased reward to innovation.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 29 (1998)
Issue (Month): 4 (Winter)
Pages: 654-679
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Handle: RePEc:rje:randje:v:29:y:1998:i:winter:p:654-679

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  1. Nancy Gallini & Suzanne Scotchmer, 2003. "Intellectual Property: When is it the Best Incentive System?," Levine's Working Paper Archive 618897000000000532, UCLA Department of Economics. [Downloadable!]
  2. Nancy Gallini and Suzanne Scotchmer., 2001. "Intellectual Property: When Is It the Best Incentive System?," Economics Working Papers E01-303, University of California at Berkeley. [Downloadable!]
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  3. Amalia Yiannaka & Murray Fulton, 2003. "Strategic Patent Breadth And Entry Deterrence With Drastic Product Innovations," Levine's Bibliography 666156000000000362, UCLA Department of Economics. [Downloadable!]
  4. Bronwyn H. Hall & Rose Marie Ham, 2000. "The Patent Paradox Revisited: Determinants of Patenting in the US Semiconductor Industry, 1980-94," Development and Comp Systems 9912001, EconWPA. [Downloadable!]
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  5. Langinier, Corinne, 2004. "Using patents to mislead rivals," Staff General Research Papers 11483, Iowa State University, Department of Economics.
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  6. Robert M. Hunt, 2002. "Patentability, industry structure, and innovation," Working Papers 01-13, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  7. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science. [Downloadable!]
  8. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Moschini, GianCarlo & Yerokhin, Oleg, 2006. "Patents, Research Exemption, and the Incentive for Sequential Innovation," Staff General Research Papers 12598, Iowa State University, Department of Economics. [Downloadable!]
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  10. Fershtman, Chaim & Markovich, Sarit, 2006. "Patents, Imitation and Licensing in an Asymmetric Dynamic R&D Race," CEPR Discussion Papers 5481, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Luca, SPINESI, 2007. "IPR for Public and Private Innovations, and Growth," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2007015, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  12. Chu, Angus C., 2008. "Effects of Blocking Patents on R&D: A Quantitative DGE Analysis," MPRA Paper 3910, University Library of Munich, Germany. [Downloadable!]
  13. Robert Hunt, 1999. "Patent reform: a mixed blessing for the U.S. economy?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 15-29. [Downloadable!]
  14. Reiko Aoki & Yossef Spiegel, 2000. "Public Disclosure of Patent Applications, R & D, and Welfare," Econometric Society World Congress 2000 Contributed Papers 1273, Econometric Society. [Downloadable!]
  15. Nancy Gallini & Suzanne Scotchmer, 2001. "Intellectual Property: When Is It the Best Incentive System?," Department of Economics, Working Paper Series 1010, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
  16. Robert M. Hunt, 1999. "Nonobviousness and the incentive to innovate: an economic analysis of intellectual property reform," Working Papers 99-3, Federal Reserve Bank of Philadelphia. [Downloadable!]
  17. Arghya Ghosh & Takao Kato & Hodaka Morita, 2007. "Discrete Innovation, Continuous Improvement, and Competitive Pressure," IZA Discussion Papers 3132, Institute for the Study of Labor (IZA). [Downloadable!]
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  18. Pierre Regibeau & Katharine Rockett, 2004. "The Relationship Between Intellectual Property Law and Competition Law: An Economic Approach," Economics Discussion Papers 581, University of Essex, Department of Economics. [Downloadable!]
  19. Luca Lambertini & Piero Tedeschi, 2006. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Working Papers 20060502, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica. [Downloadable!]
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