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The Independent Invention Defense in Intellectual Property

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  • Stephen M Maurer
  • Suzanne Scotchmer

Abstract

Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&D.
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Suggested Citation

  • Stephen M Maurer & Suzanne Scotchmer, 2003. "The Independent Invention Defense in Intellectual Property," Levine's Working Paper Archive 618897000000000544, David K. Levine.
  • Handle: RePEc:cla:levarc:618897000000000544
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    References listed on IDEAS

    as
    1. Hopenhayn, H.A. & Mitchell, M.F., 1999. "Innovation Fertility and Patent Design," Papers 303, Minnesota - Center for Economic Research.
    2. Hopenhayn, Hugo A & Mitchell, Matthew F, 2001. "Innovation Variety and Patent Breadth," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 152-166, Spring.
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    6. Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-941, December.
    7. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
    8. Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998. "Patent Breadth, Patent Life, and the Pace of Technological Progress," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 1-32, March.
    9. Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
    10. La Manna, Manfredi & Macleod, Ross & de Meza, David, 1989. "The case for permissive patents," European Economic Review, Elsevier, vol. 33(7), pages 1427-1443, September.
    11. 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.
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    Citations

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    Cited by:

    1. Ponce, Carlos J., 2007. "More secrecy... more knowledge disclosure? : On disclosure outside of patents," UC3M Working papers. Economics we077241, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Encaoua, David & Guellec, Dominique & Martinez, Catalina, 2006. "Patent systems for encouraging innovation: Lessons from economic analysis," Research Policy, Elsevier, vol. 35(9), pages 1423-1440, November.
    3. Ottoz, Elisabetta & Cugno, Franco, 2011. "Choosing the scope of trade secret law when secrets complement patents," International Review of Law and Economics, Elsevier, vol. 31(4), pages 219-227.
    4. Emeric Henry, 2010. "Runner-up Patents: Is Monopoly Inevitable?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 417-440, June.
    5. Michele Boldrin & David K Levine, 2005. "IP and Market Size," Levine's Working Paper Archive 618897000000000836, David K. Levine.
    6. Louise Keely, 2001. "Using Patents In Growth Models," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 10(6), pages 449-492.
    7. David Encaoua & Dominique Guellec & Catalina Martínez, 2010. "Sistemas de patentes para fomentar la innovación: Lecciones de análisis económico," Working Papers 1015, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
    8. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters,in: Innovation Policy and the Economy, Volume 2, pages 51-78 National Bureau of Economic Research, Inc.
    9. Carl Shapiro, 2006. "Prior User Rights," American Economic Review, American Economic Association, vol. 96(2), pages 92-96, May.
    10. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    11. Luigi Bonatti & Stefano Comino, 2011. "The Inefficiency of Patents when R&D Projects are Imperfectly Correlated and Imitation Takes Time," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 327-342, June.
    12. Emeric Henry & Carlos J. Ponce, 2008. "Waiting to Copy: On the Dynamics of the Market for Technology," Working Papers hal-01066192, HAL.
    13. Cugno Franco & Ottoz Elisabetta, 2006. "Static Inefficiency of Compulsory Licensing: Quantity vs. Price Competition," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200606, University of Turin.
    14. Ottoz Elisabetta & Cugno Franco, 2009. "Hybrid Licensing of Product Innovations," Review of Law & Economics, De Gruyter, vol. 5(1), pages 579-594, October.
    15. repec:ebl:ecbull:v:12:y:2004:i:5:p:1-7 is not listed on IDEAS
    16. Banerjee, Dyuti & Chatterjee, Ishita, 2010. "The impact of piracy on innovation in the presence of technological and market uncertainty," Information Economics and Policy, Elsevier, vol. 22(4), pages 391-397, December.
    17. Alessandra Fogli & Raquel Fernandez, 2009. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 146-177, January.
    18. Elisabetta Ottoz & Franco Cugno, 2004. "The independent invention defence in a Cournot duopoly model," Economics Bulletin, AccessEcon, vol. 12(5), pages 1-7.
    19. Emanuela Randon & Peter Simmons, 2017. "A top dog tale with preference complementarities," Journal of Economics, Springer, vol. 120(1), pages 47-63, January.
    20. Ganslandt, Mattias, 2008. "Intellectual Property Rights and Competition Policy," Working Paper Series 726, Research Institute of Industrial Economics.
    21. Michele Boldrin & David K. Levine, 2005. "Intellectual property and market size," Staff Report 360, Federal Reserve Bank of Minneapolis.
    22. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8gjo2i2i is not listed on IDEAS
    23. Johnson, Justin P., 2014. "Defensive publishing by a leading firm," Information Economics and Policy, Elsevier, vol. 28(C), pages 15-27.
    24. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.
    25. repec:hal:journl:halshs-00743037 is not listed on IDEAS

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