LECTURE 6
Name the forms of intellectual property rights and describe what they protect.
Patents -> inventions
Copyrights -> creative expressions
Trademarks -> distinctions of products and services
Design rights -> external appearance
Plant patents -> new breeds of plants
What trade-off does a patent make?
Between static and dynamic efficiency:
Dynamic efficiency -> patent corrects the underproduction of innovations problem
Static efficiency -> patent eliminates possitive externalities of innovation (nobody can profit from them)
Thus, patents give total protection to the innovator (dynamic efficiency) but only during a limited amount of time (static efficiency)
What determines optimal patent length?
The length on which the marginal dynamic gain from the patent is equal to the marginal static loss it generates
How do optimal patent length and breadth interact?
From the FOC we see that dT/db=-(dP/db)/(dP/dT)<0
This implies that the wider the patent, the shorter the optimal length and viceversa, so that the patent will either be short and wide or long and narrow.
Which mix is chosen depends on the marginal rate between length and breadth on the incentives to innovate and on social welfare (the sign of dS/db)
Under which conditions do licences increase incentives to innovate?
When frims are from different markets or when they are direct competitors depending on market structure (the higher the more competitive the market is) and the size of the innovation (increases the incentives if it is a big innovation, because it helps the innovator to compensate for the cost and risk taken)
Why would firms (not) patent their inventions?
Yes:
-Prevent copying
-Blocking other patents
-Prevent substitutes
-Enhance reputation
Profit from licensing
No:
-Ease of inventing around
-Demonstration of novelty
-Costs
What are the requirements of an invention to be patented?
Novel
Non-obvious
Useful