Shared Rights and Technological Progress

Mitchell, Matthew and Zhang, Yuzhe (2012): Shared Rights and Technological Progress.

Abstract

We study how best to reward innovators whose work builds on earlier innovations. Incentives to innovate are obtained by offering innovators the opportunity to profit from their innovations. Since innovations compete, awarding rights to one innovator reduces the value of the rights to prior innovators. We show that the optimal allocation involves shared rights, where more than one innovator is promised a share of profits from a given innovation. We interpret such allocations in three ways: as patents that infringe on prior art, as licensing through an optimally designed ever-growing patent pool, and as randomization through litigation. We contrast the rate of technological progress under the optimal allocation with the outcome if sharing is prohibitively costly, and therefore must be avoided. Avoiding sharing initially slows progress, and leads to a more variable rate of technological progress.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cumulative Innovation, Patent, Licensing, Patent Pool, Litigation
• 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; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; 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; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L5 - Regulation and Industrial Policy > L53 - Enterprise Policy

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