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Economics of patenting a research tool: participation and productivity

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  • Koo, Bonwoo
  • Wright, Brian D.

Abstract

When a new technology consists of sequences of innovations that culminate in a final consumer product, the balance between successive innovators is one of the main concerns in the design of the patent system. While intertemporal aspects of incentive are critical in this environment of sequential innovations, time plays a minor role in existing literature on dynamic models. By focusing on the incentives of follow-on innovators who commercialize an initial invention, this study examines the dynamic implications of the patent instrument (e.g., patent life) via a positive analysis. It shows that a long patent life may encourage innovation incentives and increase social welfare, contrary to existing arguments that argue that long patent life always discourages the incentive for subsequent innovations. This study also examines the implications of finite patent system in different market structures.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series EPTD discussion papers with number 88.

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Date of creation: 2002
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Handle: RePEc:fpr:eptddp:88

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Keywords: Patents Economic aspects.; Research Technological innovations.; Licensing Agreements.;

References

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  1. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
  2. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  3. Chou, T. & Haller, H., 1995. "The Division of Profit in Sequential Innovation Reconsidered," Discussion Paper 1995-64, Tilburg University, Center for Economic Research.
  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. Denicolo, Vincenzo, 1999. "The optimal life of a patent when the timing of innovation is stochastic," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 827-846, August.
  6. Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring.
  7. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
  8. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
  9. Arrow, Kenneth J. & Chang, Sheldon, 1982. "Optimal pricing, use, and exploration of uncertain natural resource stocks," Journal of Environmental Economics and Management, Elsevier, vol. 9(1), pages 1-10, March.
  10. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
  11. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  12. 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.
  13. 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.
  14. Horowitz, Andrew W & Lai, Edwin L-C, 1996. "Patent Length and the Rate of Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 785-801, November.
  15. DeBrock, Lawrence M, 1985. "Market Structure, Innovation, and Optimal Patent Life," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 223-44, April.
  16. Kitch, Edmund W, 1977. "The Nature and Function of the Patent System," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 265-90, October.
  17. Hopenhayn, Hugo A & Mitchell, Matthew F, 2001. "Innovation Variety and Patent Breadth," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 152-66, Spring.
  18. Haller, H. & Chou, T., 1995. "The Division of Profit in Sequential Innovation Reconsidered," Papers 9564, Tilburg - Center for Economic Research.
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