On the optimal mix of patent instruments

Chu, Angus C. and Furukawa, Yuichi (2010): On the optimal mix of patent instruments.

Abstract

A special characteristic of the patent system is that it features multiple patent-policy levers that can be employed by policymakers. In this note, we develop an R&D-based growth model to analyze the optimal mix of patent instruments. Specifically, we consider (a) patent breadth and (b) the division of profit in research joint ventures. Our results can be summarized as follows. First, we analytically derive the optimal mix of patent breadth and the profit-division rule. Then, we calibrate the model to quantitatively evaluate the welfare gain from optimizing both patent instruments as compared to optimizing only one patent instrument. In summary, we find that the welfare gain can be quantitatively significant.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth; R&D; intellectual property rights
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

Aghion, P., and Howitt, P., 1992. A model of growth through creative destruction. Econometrica 60, 323-351.

Chu, A., 2009. Effects of blocking patents on R&D: A quantitative DGE analysis. Journal of Economic Growth 14, 55-78.

Chu, A., 2011. The welfare cost of one-size-fits-all patent protection. Journal of Economic Dynamics and Control, forthcoming.

Cozzi, G., 1999. R&D cooperation and growth. Journal of Economic Theory 86, 17-49.

Cozzi, G., 2001. Inventing or spying? Implications for growth. Journal of Economic Growth 6, 55-77.

Cozzi, G., 2007. The Arrow effect under competitive R&D. The B.E. Journal of Macroeconomics (Contributions) 7, Issue 1, Article 2.

Cozzi, G., and Galli, S., 2009. Upstream innovation protection: Common law evolution and the dynamics of wage inequality. University of Glasgow Working Papers No. 2009-20.

Cozzi, G., Giordani, P., and Zamparelli, L., 2007. The refoundation of the symmetric equilibrium in Schumpeterian growth models. Journal of Economic Theory 136, 788-797.

Cozzi, G., and Tarola, O., 2006. R&D cooperation, innovation, and growth. Journal of Institutional and Theoretical Economics 162, 683-701.

Denicolo, V., 1996. Patent races and optimal patent breadth and length. Journal of Industrial Economics 44, 249-265.

Furukawa, Y., 2007. The protection of intellectual property rights and endogenous growth: Is stronger always better? Journal of Economic Dynamics and Control 31, 3644-3670.

Futagami, K., and Iwaisako, T., 2007. Dynamic analysis of patent policy in an endogenous growth model. Journal of Economic Theory 132, 306-334.

Gilbert, R., and Shapiro, C., 1990. Optimal patent length and breadth. RAND Journal of Economics 21, 106-112.

Greenlee, P., 2005. Endogenous formation of competitive research sharing joint ventures. Journal of Industrial Economics 53, 355 - 391.

Grossman, G., and Helpman, E., 1991. Quality ladders in the theory of growth. Review of Economic Studies 58, 43-61.

Horii, R., and Iwaisako, T., 2007. Economic growth with imperfect protection of intellectual property rights. Journal of Economics 90, 45-85.

Iwaisako, T., and Futagami, K., 2003. Patent policy in an endogenous growth model. Journal of Economics 78, 239-258.

Jones, C., 1995a. Time series tests of endogenous growth models. Quarterly Journal of Economics 110, 495-525.

Jones, C., 1995b. R&D-based models of economic growth. Journal of Political Economy 103, 759-784.

Jones, C., 1999. Growth: With or without scale effects. American Economic Review 89, 139-144.

Jones, C., and Williams, J., 1998. Measuring the social return to R&D. Quarterly Journal of Economics 113, 1119-1135.

Jones, C., and Williams, J., 2000. Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5, 65-85.

Judd, K., 1985. On the performance of patents. Econometrica 53, 567-586.

Kamien, M., Muller, E., and Zang, I., 1992. Research joint ventures and R&D cartels. American Economic Review 82, 1293-1306.

Klemperer, P., 1990. How broad should the scope of patent protection be? RAND Journal of Economics 21, 113-130.

Kremer, M., 1993. Population growth and technological change: One million B.C. to 1990. Quarterly Journal of Economics 108, 681-716.

Kwan, Y.-K., and Lai, E., 2003. Intellectual property rights protection and endogenous economic growth. Journal of Economic Dynamics and Control 27, 853-873.

Li, C.-W., 2001. On the policy implications of endogenous technological progress. Economic Journal 111, C164-C179.

Nordhaus, W., 1969. Invention, Growth, and Welfare. The MIT Press.

O'Donoghue, T., and Zweimuller, J., 2004. Patents in a model of endogenous growth. Journal of Economic Growth 9, 81-123.

Palokangas, T., 2011. Optimal patent length and breadth in an economy with creative destruction and non-diversifiable risk. Journal of Economics 102, 1-27.

Penrose, E., 1959. The Theory of the Growth of the Firm. Oxford University Press.

Peretto, P., 1998. Technological change and population growth. Journal of Economic Growth 3, 283-311.

Roller, L., Siebert, R., and Tombak, M., 2007. Why firms form (or do not form) RJVS. Economic Journal 117, 1122--1144.

Romer, P., 1990. Endogenous technological change. Journal of Political Economy 98, S71-S102.

Scotchmer, S., 2004. Innovation and Incentives. The MIT Press.

Segerstrom, P., 1998. Endogenous growth without scale effects. American Economic Review 88, 1290-1310.

Tandon, P., 1982. Optimal patents with compulsory licensing. Journal of Political Economy 90, 470-486.

Yang, W., and Yen, Y., 2010. The dragon gets new IP claws: The latest amendments to the Chinese patent law. IPO Articles and Reports.

Young, A., 1998. Growth without scale effects. Journal of Political Economy 106, 41-63.