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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, and patent pools- and 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.

Suggested Citation

  • Gastón Llanes & Stefano Trento, 2010. "Patent Policy, Patent Pools, And The Accumulation Of Claims In Sequential Innovation," UFAE and IAE Working Papers 856.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:856.10
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    Cited by:

    1. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 3-22, Winter.
    2. Gastón Llanes & Joaquín Poblete, 2014. "Ex Ante Agreements in Standard Setting and Patent‐Pool Formation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 50-67, March.
    3. Gersbach, Hans & Schneider, Maik & Schetter, Ulrich, 2015. "How Much Science? The 5 Ws (and 1 H) of Investing in Basic Research," CEPR Discussion Papers 10482, C.E.P.R. Discussion Papers.
    4. Kiedaisch, Christian, 2015. "Intellectual property rights in a quality-ladder model with persistent leadership," European Economic Review, Elsevier, vol. 80(C), pages 194-213.
    5. Takashi Kamihigashi, 2014. "An order-theoretic approach to dynamic programming: an exposition," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(1), pages 13-21, April.
    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, vol. 14(1), pages 27-57, January.
    7. 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.
    8. Galasso, Alberto, 2020. "Rewards versus intellectual property rights when commitment is limited," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 397-411.
    9. Lampert, Hodaya & Wettstein, David, 2020. "Patents and pools in pyramidal innovation structures," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    10. Spulber, Daniel F., 2016. "Patent licensing and bargaining with innovative complements and substitutes," Research in Economics, Elsevier, vol. 70(4), pages 693-713.
    11. Luigi Balletta & Antonio Tesoriere, 2020. "Cumulative innovation, open source, and distance to frontier," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1875-1920, December.
    12. Jay Pil Choi & Heiko Gerlach, 2015. "Patent pools, litigation, and innovation," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 499-523, September.
    13. Alexandrov, Alexei & Pittman, Russell & Ukhaneva, Olga, 2018. "Pricing of Complements in the U.S. freight railroads: Cournot versus Coase," MPRA Paper 86279, University Library of Munich, Germany.
    14. Takashi Kamihigashi, 2014. "Elementary results on solutions to the bellman equation of dynamic programming: existence, uniqueness, and convergence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 251-273, June.
    15. Han, Tien-Der & Mukherjee, Arijit, 2023. "Mergers of complements, endogenous product differentiation and welfare," Mathematical Social Sciences, Elsevier, vol. 126(C), pages 30-41.
    16. Justus Baron & Henry Delcamp, 2015. "The strategies of patent introduction into patent pools," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 24(8), pages 776-800, November.
    17. Llanes, Gastón, 2024. "Innovation incentives in technical standards," International Journal of Industrial Organization, Elsevier, vol. 93(C).
    18. Alexandrov, Alexei & Pittman, Russell & Ukhaneva, Olga, 2017. "Royalty stacking in the U.S. freight railroads: Cournot vs. Coase," MPRA Paper 78249, University Library of Munich, Germany.
    19. Aydogmus, Ozgur, 2022. "Increasing returns and path dependence in knowledge creation and their effects on the dynamics of patent pools," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 467-477.
    20. Justus Baron & Jorge Contreras & Martin Husovec & Pierre Larouche, 2019. "Making the Rules: The Governance of Standard Development Organizations and their Policies on Intellectual Property Rights," JRC Research Reports JRC115004, Joint Research Centre.
    21. Justus Baron & Tim Pohlmann, 2018. "Mapping standards to patents using declarations of standard‐essential patents," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(3), pages 504-534, September.
    22. Arthur Zillante & Peter M. Schwarz & Dustin C. Read, 2014. "Land Aggregation Using Contingent and Guaranteed Payments," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 702-727, January.
    23. Jinglei Huang & Danxia Xie & Zhihao Xu, 2024. "Sequential innovation and contribution distribution: measurement from game live-streaming industry," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.

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    More about this item

    Keywords

    Sequential Innovation; Patent Policy; Patent Pools; Anticommons; Double Marginalization; Complementary Monopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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