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Some Simple Economics of Patent Protection for Complex Technologies

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  • Denicolò, Vincenzo
  • Zanchettin, Piercarlo

Abstract

We analyze patent protection when innovative technologies are "complex" in that they involve sequential and complementary innovations. We argue that complexity affects the classic Nordhaus trade-off between innovation and static monopoly distortions. We parametrize the degree of sequentiality and that of complementarity and show that the optimal level of patent protection increases with both. We also address the issue of the optimal division of profit among different innovators.

Suggested Citation

  • Denicolò, Vincenzo & Zanchettin, Piercarlo, 2018. "Some Simple Economics of Patent Protection for Complex Technologies," CEPR Discussion Papers 13087, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13087
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    References listed on IDEAS

    as
    1. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
    2. Robert M. Hunt, 2004. "Patentability, Industry Structure, and Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 52(3), pages 401-425, September.
    3. repec:fth:harver:1473 is not listed on IDEAS
    4. Fershtman, Chaim & Markovich, Sarit, 2010. "Patents, imitation and licensing in an asymmetric dynamic R&D race," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 113-126, March.
    5. Guo, Jie Q & Trivedi, Pravin K, 2002. " Flexible Parametric Models for Long-Tailed Patent Count Distributions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(1), pages 63-82, February.
    6. Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
    7. 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.
    8. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
    9. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635, December.
    10. Joseph Farrell & Carl Shapiro, 2008. "How Strong Are Weak Patents?," American Economic Review, American Economic Association, vol. 98(4), pages 1347-1369, September.
    11. Derek J. Clark & Kai A. Konrad, 2008. "Fragmented Property Rights and Incentives for R& D," Management Science, INFORMS, vol. 54(5), pages 969-981, May.
    12. Annalisa Biagi & Vincenzo Denicolò, 2014. "Timing of Discovery and the Division of Profit With Complementary Innovations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 89-102, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Complementarity; Division of profit; Elasticity of the supply of inventions; Patent design; Sequential innovation;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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