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Patent Policy, Patent Pools, And The Accumulation Of Claims In Sequential Innovation

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  • Gastón Llanes
  • Stefano Trento

Abstract

We present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. We compare innovation activity under three regimes patents,no-patents,andpatentpoolsand find that none of them can reach the first best. We find that the first best can be reached through a decentralized tax-subsidy mechanism, by which innovators receive a subsidy when they innovate, and are taxed with subsequent innovations. This finding implies that optimal transfers work in the exact opposite way as traditional patents. Finally, we consider patents of finite duration and determine the optimal patent length.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 523.

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Date of creation: Nov 2010
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Handle: RePEc:bge:wpaper:523

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Keywords: Sequential Innovation; Patent Policy; Patent Pools; Anticommons; Double Marginalization; Complementary Monopoly;

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  1. Gastón Llanes & Stefano Trento, 2009. "Anticommons and Optimal Patent Policy in a Model of Sequential Innovation," Harvard Business School Working Papers 09-148, Harvard Business School.
  2. V. V. Chari & Larry E. Jones, 1991. "A reconsideration of the problem of social cost: free riders and monopolists," Staff Report, Federal Reserve Bank of Minneapolis 142, Federal Reserve Bank of Minneapolis.
  3. Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers, Centro de Estudios Monetarios Y Financieros- 0012, Centro de Estudios Monetarios Y Financieros-.
  4. 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.
  5. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  6. Green, J.R. & Scotchmer, S., 1993. "On the Division of Profit in Sequential Innovation," Harvard Institute of Economic Research Working Papers 1638, Harvard - Institute of Economic Research.
  7. Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer, Springer, vol. 24(2), pages 231-253, August.
  8. Michele Boldrin & David K. Levine, 2005. "The economics of ideas and intellectual property," Staff Report, Federal Reserve Bank of Minneapolis 357, Federal Reserve Bank of Minneapolis.
  9. 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.
  10. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  11. Suzanne Scotchmer, 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.
  12. Steffen Brenner, 2009. "Optimal formation rules for patent pools," Economic Theory, Springer, Springer, vol. 40(3), pages 373-388, September.
  13. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 76, pages 316.
  14. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Michele Boldrin & David K. Levine, 2012. "The case against patents," Working Papers 2012-035, Federal Reserve Bank of St. Louis.
  2. Michele Boldrin & David K Levine, 2012. "The Case Against Patents," Levine's Working Paper Archive 786969000000000465, David K. Levine.
  3. Jay Pil Choi & Heiko Gerlach, 2013. "Patent Pools, Litigation and Innovation," CESifo Working Paper Series 4429, CESifo Group Munich.
  4. Takashi Kamihigashi, 2013. "An Order-Theoretic Approach to Dynamic Programming: An Exposition," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2013-29, Research Institute for Economics & Business Administration, Kobe University, revised Nov 2013.
  5. Takashi Kamihigashi, 2013. "Elementary Results on Solutions to the Bellman Equation of Dynamic Programming:Existence, Uniqueness, and Convergence," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2013-35, Research Institute for Economics & Business Administration, Kobe University, revised Dec 2013.
  6. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 14(1), pages 31, January.

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