Patents, Research Exemption, and the Incentive for Sequential Innovation

We develop a quality ladder model to study the R&D incentive impacts of intellectual property rights with a “research exemption” or “experimental use” provision. The innovation process is sequential and cumulative and takes place alongside production in an infinite-horizon setting. We solve the model under two distinct intellectual property regimes, characterize the properties of the relevant Markov perfect equilibria, and investigate the profit and welfare effects of the research exemption. We find that firms, ex ante, always prefer full patent protection. The welfare ranking of the two intellectual property regimes, on the other hand, depends on the relative magnitudes of the costs of initial innovation and improvements.

[1]  Perpetual Race to Stay Ahead , 2009 .

[2]  Bernard Le Buanec,et al.  Protection of plant-related innovations: Evolution and current discussion , 2006 .

[3]  Talia Bar.  defensive publications in an r&d race , 2006, Journal of economics & management strategy.

[4]  R. Levin,et al.  A patent system for the 21st Century , 2005 .

[5]  M. Rimmer,et al.  The freedom to tinker: patent law and experimental use , 2005 .

[6]  J. R. Thomas.  Scientific Research and the Experimental Use Privilege in Patent Law , 2004 .

[7]  R. Hunt.  Patentability, Industry Structure, and Innovation , 2004 .

[8]  James J. Anton,et al.  Little patents and big secrets: managing intellectual property , 2004 .

[9]  James Bessen.  Holdup and Licensing of Cumulative Innovations with Private Information , 2004 .

[10]  S. Smith,et al.  Intellectual Property Rights, Patents, Plant Variety Protection and Contracts: A Perspective from the Private Sector 1 29 , 2004 .

[11]  S. Scotchmer,et al.  Innovation and Incentives , 2004 .

[12]  Barbara Fleck,et al.  Intellectual property protection for plant-related inventions in Europe , 2003, Nature Reviews Genetics.

[13]  G. Moschini.  Intellectual Property Rights and the World Trade Organization: Retrospect and Prospects , 2003 .

[14]  R. Eisenberg.  Patent Swords and Shields , 2003, Science.

[15]  Mark D. Janis,et al.  Intellectual property protection for plant innovation: Unresolved issues after J.E.M. v. Pioneer , 2002, Nature Biotechnology.

[16]  Vincenzo Denicolò,et al.  How should forward patent protection be provided , 2002 .

[17]  Eric Maskin,et al.  Markov Perfect Equilibrium: I. Observable Actions , 2001, J. Econ. Theory.

[18]  Ariel Pakes,et al.  A Framework for Applied Dynamic Analysis in I.O , 2000 .

[19]  Vincenzo Denicolò,et al.  Two-Stage Patent Races and Patent Policy , 2000 .

[20]  Ted O'Donoghue,et al.  A Patentability Requirement For Sequential Innovation , 1998 .

[21]  Suzanne Scotchmer,et al.  Patent Breadth, Patent Life, and the Pace of Technological Progress , 1998 .

[22]  O’D,et al.  Patent Breadth , Patent Life , and the Pace of Technological Progress , 1998 .

[23]  Eric Maskin,et al.  Sequential Innovation, Patents, and Imitation , 2000 .

[24]  S. Scotchmer,et al.  Protecting Early Innovators: Should Second-Generation Products Be Patentable? , 1996 .

[25]  Katharine Rockett,et al.  Optimal Patent Design and the Diffusion of Innovations , 1996 .

[26]  Jerry R. Green,et al.  On the Division of Profit in Sequential Innovation , 1995 .

[27]  D. Kevles,et al.  Plants as Intellectual Property: American Practice, Law, and Policy in World Context , 1992, Osiris.

[28]  S. Scotchmer,et al.  Standing on the Shoulders of Giants: Cumulative Research and the Patent Law , 1991 .

[29]  Brian D. Wright,et al.  Technology Transfer under Asymmetric Information , 1990 .

[30]  George Hendrikse,et al.  The Theory of Industrial Organization , 1989 .

[31]  John Beath,et al.  Strategic R&D Policy , 1989 .

[32]  J. Stiglitz,et al.  The Invariance of Market Innovation to the Number of Firms , 1987 .

[33]  Drew Fudenberg,et al.  Preemption, Leapfrogging, and Co­mpetition in Patent Races , 1983 .

[34]  Jennifer F. Reinganum.  Uncertain Innovation and the Persistence of Monopoly , 1982 .

[35]  D. Newbery,et al.  Preemptive Patenting and the Persistence of Monopoly , 1982 .

[36]  William D. Nordhaus,et al.  Invention, Growth, and Welfare: A Theoretical Treatment of Technological Change by William D. Nordhaus (review) , 1969, Technology and Culture.

[37]  D. Jorgenson.  The Rate and Direction of Inventive Activity. , 1963 .

[38]  K. Arrow.  Economic Welfare and the Allocation of Resources for Invention , 1962 .

[39]  S. Smith,et al.  Variety Protection and Contracts : A Perspective from the Private Sector , 2022 .