The Dual Effects of Intellectual Property Regulations: Within- and Between-Patent Competition in the US (original) (raw)
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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.
Patents and incentives to innovate: Some theoretical and empirical economic evidence
2006
ABSTRACT. In this note, we try to evaluate how effective the patent system is in fostering innovation. We first develop the microeconomic reasoning underlying the legal protection of intellectual property. We then try to assess whether this legal protection does indeed fulfil its mission. We show that due to the difficulty of measuring innovative output, it is hard to reach any conclusive answer.
Patents, Competition, and Firms’ Innovation Incentives
Industry and Innovation, 2014
In this paper we analyze how industrial property rights (IPRs), measured by patents granted, affect competition at the industry level, and their induced effects on firms' innovation incentives. We use for that purpose a panel dataset of Spanish manufacturing firms for the period 1990-2006. Using indicators of the fundamentals of competitive pressure, we construct a new measure of competition. Our results indicate that patenting activity in an industry lowers competition. In addition, we obtain that enhanced competition discourages innovation incentives in terms of firms' R&D expenditures or the number of product innovations, but it encourages process innovations.
Patent systems for encouraging innovation: Lessons from economic analysis
Research Policy, 2006
Economic theory views patents as policy instruments aimed at fostering innovation and diffusion. Three major implications are drawn regarding current policy debates. First, patents may not be the most effective means of protection for inventors to recover R&D investments when imitation is costly and first mover advantages are important. Second, patentability requirements, such as novelty or non-obviousness, should be sufficiently stringent to avoid the grant of patents for inventions with low social value that increase the social cost of the patent system. Third, the trade-off between the patent policy instruments of length and breadth could be used to provide sufficient incentives to inventions with high social value. Beyond these three implications, economic theory also pleads for a mechanism design approach to the patent system, where an optimal patent system could be based on a menu of different degrees of patent protection with stronger protection corresponding to higher fees.
Journal of Industrial Organization Education, 2006
Which kind of intellectual property regime is more favorable to innovation: one that enforces patents or one that does not? Economic theory is unable to answer this question, as valid arguments can be made both for and against patents; hence we must turn to empirical evidence. In this paper, we review empirical evidence gathered by other researchers and add new evidence of our own. We conclude that the evidence suggests that patents do not promote innovation, but instead retard it.