Patent Races, Product Standards, and International Competition

Problems and Perspectives in Management, 2005

A simple model of patent races with an application to strategic subsidies in R&D" AUTHORS José Luis Ferreira ARTICLE INFO José Luis Ferreira (2005). A simple model of patent races with an application to strategic subsidies in R&D. Problems and Perspectives in Management, 3(3) RELEASED ON Tuesday,

Research Policy, 2004

This paper analyses the relationship between strategies to protect intellectual property rights and their impact on the likelihood of joining formal standardisation processes. It is based on a small sample of European companies. On the one hand, theory suggests that the stronger the protection of own technological know-how, the higher the likelihood to join formal standardisation processes in order to leverage the value of the technological portfolio. On the other hand, companies at the leading edge are often in such a strong position that they do not need the support of standards to market their products successfully. The results of the Probit models to explain the likelihood to join standardisation processes support the latter theoretical hypothesis: the higher the patent intensities of companies, the lower is their tendency to join standardisation processes.

Journal of Economics & Management Strategy, 2014

We present a model of standard setting and patent pool formation. We study the effects of alternative standard-setting and pool-formation rules on technology choice, prices and welfare. We find three main results. First, we show that allowing patent pools may reduce welfare when standards are negotiated and patent pools need to be ex-post incentive compatible. Second, we show that it is not possible to rank in welfare terms combinations of standardsetting and pool-formation rules when patent pools need to be ex-post incentive compatible. Third, we show that allowing firms to sign ex-ante agreements regarding pool participation dominates in terms of welfare any other policy rule. Our proposal does not require the Standard Setting Organization to have information on patent ownership, the terms of license agreements, or the value added of patents.

1994

International Journal of Industrial Organization, 2010

R&D is an inherently dynamic process which typically involves different intermediate stages that need to be developed before the completion of the final invention. Firms are not necessarily symmetric in their R&D abilities; some may have an advantage in early stages of the R&D process while others may have advantages in other stages of the process. This paper uses a two-firm asymmetric-ability multistage R&D race model to analyze the effect of patents, imitations and licensing arrangements on the speed of innovation, firm value and consumers' surplus. By using numerical analyses to study the MPE of the R&D race, the paper demonstrates the circumstances under which a weak patent protection regime, which facilitates free imitation of any intermediate technology, may yield a higher consumers' surplus and total surplus than a regime that awards a patent for the final innovation. The advantage of imitation may hold even when we allow for voluntary licensing of intermediate technologies.

2012

Abstract: With the America Invents Act of 2011, the US changed its patent-issuing rule from first-to-invent to first-to-file, the international norm. We investigate the effect of such a policy change in a two-country model of R&D competition for two sequential (basic and final) inventions. We find that a switch never speeds up basic research. A delay is more likely especially in industries where the final product generates more value in the US Simulations show that a delay in basic research also retards final invention, decreasing world welfare.

2007

Abstract: The US has been under pressure to abandon the unique first-to-invent feature of its patent law for awarding patents. The opposition to reform however argues that switch to a first-to-file rule, the international norm, will undermine innovation. We evaluate this argument in a dynamic stochastic model of a patent race. The result generally supports the opposition's argument.

2009

This paper investigates the impact of companies" motivations to patent on the characteristics of their patent portfolio using international survey data. Three main findings emerge. First, companies mainly file for an exclusion motive and to protect their freedom to operate (FTO). Second, the exclusion motivation is driven by competitors" patenting behavior and pushes companies to apply for patents, suggesting a "patent arms race." Third, there is strong evidence that, in managing their patent portfolio, firms face a trade-off between quality and quantity, as measured with the average degree of internationalization of patents. This trade-off is exacerbated by the FTO motivation.

The Journal of Law and Economics, 2002

A patent only protects an innovator from others producing the same product, but it does not protect him from others producing better products under new patents. Therefore, one may divide up the source of competition facing an innovator into within-patent competition, which results from production of the same product, and betweenpatent competition, which results from production of products on other patents. Previous theoretical and empirical micro -based analyses have emphasized the effects of intellectual property regulations on within -patent competition by showing how protecting innovative returns from imitators raises R&D incentives. However, between-patent competition affects innovative returns, particularly through creative destruction in the many high-tech industries that seem central to overall economic progress. This suggests that a fuller understanding of IP-regulations take into account its effects on between-patent competition. We find that the total effects of intellectual property regulations depend heavily on whether these unexplored effects are present. We attempt to estimate the relative magnitudes of the two sources of competition in limiting innovative returns in the U.S. pharmaceuticals market. In this market within -patent competition from so-called generic producers has been analyzed relatively more compared to competition between-patents through so called therapeutic competition. We estimate that between-patent competition, most of which occurs while a drug is under patent, costs the innovator at least as much as within-patent competition, which cannot occur until a drug is off patent. The reduction in the present discounted value of the innovator's return from between-patent competition appears to be at least as large as the reduction from competition within -patents, and may be much larger.

Journal of Economics, 2007

We consider a market for vertically differentiated goods where firms enter over time, after having developed innovations characterised by different quality levels. We show that patent height and length interact to determine the ultimate emergence of duopoly. In general, imposing quality improvements on later entrants entails the persistence of monopoly, while a duopoly equilibrium emerges when the second innovator is allowed to produce a sufficiently inferior quality and the patent protection granted to the first innovator is not too long-lasting.

Research Policy

California Law Review

Scientometrics, 2005

Emory Economics, 2009

While the rest of the world issues patents to those who file applications first the U.S. do so to those who can demonstrate to have made inventions first. The U.S. has recently been under pressure to conform to the international rule. In this paper I examine the effect of international harmonization of the patent-awarding rules. In a dynamic two-country model of R&D competition for sequential inventions, I find that harmonization to the first-to-file rule can undermine innovation. This result is more like to arise if secondary innovations are relatively easy and their commercial successes are predominantly in the U.S. markets.

2013