IDEAS home Printed from https://ideas.repec.org/a/fip/fedaer/y2003iq4p1-14nv.88no.4.html
   My bibliography  Save this article

The uninvited guest: patents on Wall Street

Author

Listed:
  • Robert P. Merges

Abstract

For at least the past twenty-five years, financial services industries have been creating innovative products and services without the help of patents. The 1998 State Street Bank case changed all this, making patents freely available in these industries. Will patents help or hurt financial services innovation in the long run? This article sheds some light on this issue. ; Before the advent of patents, several “appropriability” mechanisms protected financial services innovation: “first mover” advantages, complementary or “cospecific” assets, and trade secrecy. Evidence suggests that, in the immediate post-patent era, financial firms’ first order of business was to protect these traditional appropriability practices. This attitude explains the early push to secure a “prior use rights” defense to protect established firms against patent claims by upstart outsiders. From a historical perspective, this reaction to the “patent threat” tracks that of other industries: in particular, nineteenth-century railroads and the software industry of the 1980s. ; In the end, the author argues, patents are not likely to cause any real and lasting problems. Although patents may increase the costs of interchanging innovative ideas, they may bring some unintended benefits as well—by fostering spin-offs and facilitating entry by start-ups, for example. Like random shocks in the natural world, the new patent regime provides a shakeup that could bring some good but unpredictable consequences.

Suggested Citation

  • Robert P. Merges, 2003. "The uninvited guest: patents on Wall Street," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 1-14.
  • Handle: RePEc:fip:fedaer:y:2003:i:q4:p:1-14:n:v.88no.4
    as

    Download full text from publisher

    File URL: http://www.atl.frb.org/filelegacydocs/erq403_merges.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    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. Eric Tymigne, 2011. "Financial stability, regulatory buffers and economic growth after the Great Recession: some regulatory implications," Chapters,in: Financial Instability and Economic Security after the Great Recession, chapter 6, pages 114-140 Edward Elgar Publishing.
    2. Bronwyn H. Hall, 2009. "Business And Financial Method Patents, Innovation, And Policy," Scottish Journal of Political Economy, Scottish Economic Society, pages 443-473.
    3. Stefan Wagner, 2009. "Patente in der europäischen Finanzindustrie: terra incognita?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(1), pages 156-166.

    More about this item

    Keywords

    Patents ; Financial services industry;

    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:fip:fedaer:y:2003:i:q4:p:1-14:n:v.88no.4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector). General contact details of provider: http://edirc.repec.org/data/frbatus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.