litigation and settlement in patent infringement cases a patent grants its owner the right to sue intruders that have been identified the patentholder must then supervise the market and react in case of infringement his reaction may be to go to court to settle or to accept entry we investigate how intensive the monitoring effort should be and how it will influence the entry decision in a simultaneous game even if the penalty paid by the infringer in case of a finding of liability is high the patentholder may prefer a settlement to a trial the likelihood of entry may increase with the penalty in sequential games regardless who plays first entry occurs comparatively less often than in the simultaneous game

effects of information revelation policies under market structure uncertainty geographically dispersed sellers in electronic reverse marketplaces such as those hosted by market makers like ariba are uncertain about the number of competitors they face in any given market session we refer to this uncertainty about the number of competitors as market structure uncertainty over the course of several market sessions sellers learn about the competitive nature of the marketplace how they learn to reduce the market structure uncertainty depends on the market transparency scheme or the revelation policy adopted a revelation policy determines the extent to which information the number of sellers in a session their bidding patterns etc is revealed to sellers because these policies control what sellers learn and how they bid in future sessions they determine buyer surplus possibly because market structure uncertainty is more prevalent in information technology enabled marketplaces than traditional ones prior work has not addressed the impact of revelation policies on this type of uncertainty currently there is little guidance available to buyers in choosing the appropriate revelation policy to address this information technology enabled problem we use game theory to compare the buyer surplus generated under a set of revelation policies commonly used in electronic reverse marketplaces we demonstrate that the policy that generates the least amount of market structure uncertainty for the sellers always maximizes buyer surplus we further investigate to provide intuition regarding how bidders reactions to overcome uncertainty differs with the nature of uncertainty and how those reactions impact buyer surplus

how do competitive pressures affect incentives to innovate when there is a market for inventions competition and intellectual property ip protections are complements in stimulating innovation when ip is appropriable a market for inventions forms and competitive pressures increase incentives to innovate competition among producers the demand side of the market for inventions and competition among inventors the supply side of the market for inventions create incentives to innovate when ip is not fully appropriable markets for inventions are limited and competitive pressures can decrease incentives to innovate firms vertically integrate r d and production and share technology to appropriate the returns to ip this implies that antitrust policy and ip protections are complements

the invariance of market innovation to the number of firms this article provides a set of conditions under which the r d undertaken in a market economy is invariant to the number or size distribution of firms and the market s allocation is efficient i e given the aggregate expenditure the market chooses socially optimal projects as in several patent race studies we assume that a winner takes all competition determines firms gains but our model differs from earlier studies in that firms are not restricted to undertake only one research project our analysis shows that how one characterizes a firm s choices and innovation technologies has a strong influence on the conclusions one draws from economic analyses of r d

efficient patent pools the paper builds a tractable model of patent pools agreements among patent owners to license sets of their patents it provides a necessary and sufficient condition for patent pools to enhance welfare and shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing the paper allows patents to differ in importance asymmetric blocking patterns and licensors to also be licensees we undertake some initial exploration of the impact of pools on innovation the analysis has broader applicability than pools being relevant to a number of co marketing arrangements

a survey of the economics of patent systems and procedures the last several decades have seen increases in patenting activity worldwide as well as growing issues related to patent quality in response to these quality issues a recent patent literature has emerged that investigates the behavior and incentives of patent examiners applicants and third parties in this paper we provide an overview of patent procedures patent systems and a survey of the new economic literature on patent systems both theoretical and empirical papers are considered policy implications coming from this literature are presented

market structure and communicable diseases communicable diseases pose a formidable challenge for public policy using numerical simulations we show under which scenarios a monopolist s price and prevalence paths converge to a non zero steady state in contrast a planner typically eradicates the disease if eradication is impossible the planner subsidizes treatments as long as the prevalence can be controlled drug resistance exacerbates the welfare difference between monopoly and first best outcomes nevertheless because the negative externalities from resistance compete with the positive externalities of treatment a mixed competition monopoly regime may perform better than competition alone this result has important implications for the design of many drug patents les maladies contagieuses posent un defi important a la politique publique a l aide de simulations numeriques on montre dans quels scenarios les prix de monopole et le sentier de prevalence tendent a engendrer un regime permanent ou la maladie ne disparait pas un planificateur typiquement elimine la maladie si l eradication est impossible le planificateur subventionne les traitements aussi longtemps que la prevalence peut etre controlee la resistance au remede agrandit l ecart de bien etre entre le cas du monopole et l optimum cependant comme les effets externes negatifs de la resistance au traitement sont en conflit avec les effets externes positifs des traitements un regime mixte concurrence monopole peut donner de meilleurs resultats que la seule concurrence ce resultat a des implications importantes pour l elaboration de nombreux brevets pharmaceutiques

licensing in the theory of innovation this article analyzes licensing in a noncooperative r d game we ask two questions what are the incentives for licensing a production technology and what is the impact of licensing on the pattern of innovation and the consequent evolution of industry costs and market structure the gainsfrom trading information through licensing contracts are achieved through the replacement of inefficient production techniques the ex post incentive and the elimination of inefficient research expenditures the ex ante incentive in a duopoly the availability of licensing encourages research when the firms initial production technologies are close in costs and discourages research when initial costs are asymmetric

patents and the global diffusion of new drugs analysis of the timing of launches of 642 new drugs in 76 countries during 1983 2002 shows that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries price regulation delays launch while longer and more extensive patent rights accelerate it health policy institutions and economic and demographic factors that make markets more profitable also speed up diffusion the estimated effects are generally robust to controlling for endogeneity of policy regimes with country fixed effects and instrumental variables the results highlight the important role of policy choices in driving the diffusion of new innovations

deterrence by market sharing a strategic incentive for licensing the potential of an incumbent firm to retain its dominant position in a market is a focal point of the modem theory of industrial organization a recent literature examines this issue for markets in which challengers threaten an incumbent s position by engaging in research for a new technology richard gilbert and david newbery 1982 show that an incumbent firm with a firstmover advantage will preempt potential entrants by inventing a new technology slightly earlier than would its rivals in a stochastic r d therefore its introduction does not alter the decision to research when the pre innovation market is characterized by an incumbent and potential entrants stephen salant 1984 shows that licensing ex post to innovation can alter the research decision as anticipation of the returns from future licensing encourages research by the entrant as a counterpoint to the salant result i find that licensing ex ante to research may discourage further research by the entrant indeed this strategic incentive for licensing may be so strong as to persuade the incumbent as well as the entrant to terminate research activity to isolate this incentive for licensing from the one discussed by salant a simple model is constructed in which licensing of future technologies is not desirable anecdotal evidence suggests that the strategic incentive does lead innovators in some markets to license their technologies examples of this information sharing are prevalent in markets where technological change is rapid in the 1940 s standard oil of new jersey discovered a process for synthetic rubber it traded patent rights on this process for a synthetic oil production process discovered by farben a german rubber company in both the synthetic oil and synthetic rubber markets rival companies were department of economics scarsborough college university of toronto toronto ontario canada m5s lal i thank jon cohen and ron saunders for discussions that inspired this paper i am also grateful to yehuda kotowitz andy mclennan jennifer reinganum ralph winter myma wooders two anonymous referees and seminar participants at the university of toronto for helpful comments on earlier drafts

do national patent laws stimulate domestic innovation in a global patenting environment a cross country analysis of pharmaceutical patent protection 1978 2002 this paper evaluates the effects of patent protection on phar maceutical innovations for 26 countries that established pharmaceutical patent laws during 1978 2002 controlling for country characteristics through matched sampling techniques to establish two proper comparison sets among 92 sampled countries and through country pair fixed effects regressions this study yields robust results national patent protection alone does not stimulate domestic innovation as estimated by changes in citation weighted u s patent awards domestic r d and pharmaceutical industry exports however domestic innovation accelerates in countries with higher levels of economic development educational attainment and economic freedom additionally there appears to be an optimal level of intellectual property rights regulation above which further enhancement reduces innovative activities

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

patent pools and cross licensing in the shadow of patent litigation this paper develops a framework to analyze the incentives to form a patent pool or engage in cross licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable it analyzes the private incentives to litigate and compares them with the social incentives it shows that pooling arrangements can have the effect of sheltering invalid patents from challenges this result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each other s patents if litigation costs are not too large

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

on the optimality of the patent renewal system the patent system is mainly a renewal system the patent life is chosen by the patentee in return for fees i ask whether such a system can be justified by asymmetric information on costs and benefits of research in such a model i show that renewal mechanisms possibly with subsidies are equivalent to direct revelation mechanisms and therefore cannot be improved on regardless of the objective function under plausible circumstances patents should have a uniform life rather than varying in length as typically occurs under a renewal system

how do patents affect follow on innovation evidence from the human genome we investigate whether patents on human genes have affected follow on scientific research and product development using administrative data on successful and unsuccessful patent applications submitted to the us patent and trademark office we link the exact gene sequences claimed in each application with data measuring follow on scientific research and commercial investments using this data we document novel evidence of selection into patenting patented genes appear more valuable prior to being patented than non patented genes this evidence of selection motivates two quasi experimental approaches both of which suggest that on average gene patents have had no quantitatively important effect on follow on innovation

cooperating with competitors patent pooling and choice of a new standard abstract i examine the efficiency of patent pooling in a setting that allows for the interplay between the standards process in which owners of essential intellectual property ip develop a new product and the subsequent pooling decision in which ip prices are coordinated if one of the ip owners is also the incumbent of a product that employs the current competing standard referred to as overlapping ownership then the relationship among the ip owners will be both vertical through their ip and horizontal through their competing interests in the final products consumers are better off when ip owners cooperate even when these owners are effectively competitors because of lower prices and greater product variety consumers prefer however that the agreements not admit firms with overlapping ownership these results inform antitrust policy on cooperative agreements among competitors

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

patent pools and innovation in substitute technologies evidence from the 19th century sewing machine industry patent pools which combine complementary patents of competing firms are expected to increase overall welfare but potentially discourage innovation in substitutes for the pool technology this article exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th century sewing machine industry this analysis reveals a substantial increase in innovation for an albeit technologically inferior substitute technology historical evidence suggests that the creation of a pool diverted innovation toward an inferior substitute technology by creating differential license fees and litigation risks

the market impacts of pharmaceutical product patents in developing countries evidence from india in 2005 as the result of a world trade organization mandate india implemented a patent reform for pharmaceuticals that was intended to comply with the 1995 trade related aspects of intellectual property rights trips exploiting variation in the timing of patent decisions we estimate that a molecule receiving a patent experienced an average price increase of just 3 6 percent with larger increases for more recently developed molecules and for those produced by justone firm when the patent system began our results also show little impact on quantities sold or on the number of pharmaceutical firms operating in the market

adaptive control in the presence of time varying parameters in the previous chapters two strands of literature have been brought together the first strand is the research on time varying parameters following a return to normality model viz harvey and phillips 1982 and swamy and tinsley 1980 1 the second strand is the work on adaptive control in the tradition of tse and bar shalom 1973 and kendrick 1981 as indicated in chapter 2 given a time horizon of t periods the goal was to find the values of control variables for period 0 period 1 and so on until period t 1 which minimized the objective functional or cost to go in an adaptive control framework for each period in the time horizon say period t several trial or search values of the controls were tried 2 the optimal cost to go associated with each search control was then calculated following kendrick 1981 ch 10 the computations performed at time t were organized in three steps first the nominal value for the parameters for period t through t was computed using their estimates for time t 1 and their expected law of motion the first search control was also selected then the search for the optimal control was carried out this step included a use the search control and the nominal value for the parameters to get the projected states and covariances in period t 1 b get the nominal path for the states and controls for the period t 1 through t by solving the certainty equivalence ce problem with the projected states as the initial condition c compute the riccati matrices for periods t 1 t d update and project the covariances from period t 1 given t i e the covariance seen at point a above to t 1 e calculate the approximate cost to go for the period t through t f choose a new search control and repeat a f until all search points are evaluated g select the control which yields the minimum cost after the selected control was applied to the system and the process moved one step forward in time the estimates of the states and parameters were updated

do patents work thickets trolls and antibiotic resistance this paper connects ideas from recent literature on the economics of intellectual property ip to address the question did the strengthening and broadening of ip rights from important patent policy changes in the us promote greater innovation the analysis rests on the theory of cumulative innovation which shows that if ip rights on a pioneer invention extend to follow on research and impediments to contracting exist then strengthening patents can actually reduce overall innovation recent empirical studies are consistent with the theory patents can significantly deter follow on research in complex technology areas where contracting is difficult computers electronics telecommunications but not in drugs chemicals and human genes i outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling patent thickets and the anti commons of fragmented ownership i then apply the analysis to the antibiotics market drawing on recent research to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance the literature provides persuasive evidence that the policy changes overreached in broadening and strengthening ip rights and reveals important patent reforms for improving the effectiveness of patent systems in the us and canada

patent quality and research productivity measuring innovation with multiple indicators we analyse the determinants of the decline in research productivity using panel data on manufacturing firms in the us for the period 1980 93 we focus on three factors the level of demand the quality of patents and technological exhaustion we develop an index of patent quality using detailed patent information and show that using multiple indicators substantially reduces the measured variance in quality research productivity at the firm level is inversely related to patent quality and the level of demand as predicted by theory and patent quality is positively associated with the stock market value of firms

patent thickets courts and the market for innovation we study how fragmentation of patent rights and the formation of the court of appeals for the federal circuit cafc affected the duration of patent disputes and thus the speed of technology diffusion through licensing we develop a model of patent litigation which predicts faster settlement when patent rights are fragmented and when there is less uncertainty about court outcomes as was associated with the pro patent shift of the cafc we confirm these predictions empirically using a data set that covers patent suits in u s district courts during the period 1975 2000 finally we analyze how fragmentation affects total settlement delay considering both the reduction in dispute duration and the increase in the number of patent negotiations