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In Hall 2004 there The following is a table of 'exogenous' events that have affected patenting:, from Hall (2004) unless otherwise stated.
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*This page is included under the section [[BPP Field Exam]]
*This page is associated with [[BPP Field Exam Papers]]
==Definitions==
[[Nelson (1959) - The Simple Economics Of Basic Scientific Research |Nelson (1959)]]:
*'''Invention''' is defined as the human activity directed toward the creation of new and improved practical products and processes.
*'''Scientific research''' is the human (sic) activity directed towards the '''advancement of knowledge'''. Knowledge is either:
**'''Facts or data''' observed in '''reproduceable experiments'''
**'''Theories or relationships between facts''' (usually equations).
[[Cohen Levinthal (1990) - Absorptive Capacity |Cohen and Levinthal (1990)]]:
*'''Absorbative capacity''' is defined as the ability to evaluate and utilize outside knowledge This includes recognizing and assimilating new knowledge and applying it to commercial ends.
[[Gompers Lerner Sharfstein (2003) - Entrepreneurial Spawning |Gompers, P., J. Lerner, and D. Sharfstein (2003)]]:
*'''Fairchild View''': Employees are trained and conditioned to be entrepreneurs by working in a VC backed firm (exposure to networks etc)
*'''Xerox View''': Large firms are incapable of responding to radical changes that upset their business; thus the invention of a disruptive technology leads the inventor to leave
[[Henderson Clark (1990) - Architectural Innovation |Henderson and Clark (1990)]]:
*'''Incremental innovation''' introduces relatively minor changes to an existing product
*'''Radical innovation''', by constrast, is based on a different set of scientific or engineering pricipals (to the established paradigm) and it opens up new markets and potential applications
*'''Modular innovation''' replaces a core component, but leaves the architecture untouched
*'''Architectural innovation''' leaves the existing components, and the core design concepts, essentially untouched, but changes the ways in which the components are linked
*A '''component''' is a physically distinct portion of a product that embodies a a core design concept and performs a well defined function.
*A '''channel''' is a formal or informal communication channel within a firm
*A '''filter''' allows a firm to ignore information that is not relevant (or not compatible with its capabilities), and to immediately identify what is crucial in its information stream.
*A '''problem solving strategy''' is employed by engineers and designers inside of the firm. These strategies become limited (or specialized) over time to match the channels and filters of the organization and are a part of the firm's organizational capabilities.
*'''Dominant design''': Technological evolution is characterized by periods of experimentation, followed by the emergence of a dominant design.
*'''Organizational capabilities''' are loosely the skills and problem solving abilities of a firm, including it's communication channels, filters and strategies
[[Lamoreaux Sokoloff (2005) - Decline Of The Independent Inventor |Lamoreaux and Sokoloff (2005)]]:
*'''Innovation''' is defined by Schumpeter as distinct from invention - it is "making new combinations". When entrepreneurs innovate, they take a new idea and make it work. Thus innovation is synonomous with commercialization: embody the idea in a productive enterprise and generate profits. Entrepreneurs innovate and then managers run (once profits to the innovation have been dissapated).
*'''Patents''': Are the grants of exclusive property rights to a new technological idea
[[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]:
*'''AUTM''' is the Association of University Technology Managers
*'''Bayh-Dole''' is the Bayl-Dole act of 1980 (see the paper and also )
*'''TTO''' is a Technology Transfer Office
[[Murray Stern (2005) - Do Formal Intellectual Property Rights Hinder The Free Flow Of Scientific Knowledge |Murray and Stern (2005)]]:
*'''Anti-Commons Hypothesis''': IPR may inhibit the free flow and diffusion of scientific knowledge and the ability of researchers to build cummulatively on each other's discoveries.
*'''Papers''' are scientific articles designed to share new knowledge
*'''Patents''' share knowledge and impose a property right over it simultaneousl
*The '''Stokes Model''': uses axes "Consideration of Use" and "Quest for Fundamental Understanding" to categorize "Pure Applied", "Pure Basic" and "Use Inspired" research.
*The '''open science institution''' uses rewards for conducting basic research that favor cummulative knowledge production over the long term
*The '''private property regime''' ignores the impact on follow on research, and instead attempts to exclude others in order to appropriate value through commercialization
[[Teece (1986) - Profiting From Technological Innovation |Teece (1986)]]:
*The '''Appropriability Regime''' is made up of two components: The nature of the technology (tacit/codified knowledge) and the efficacy of legal mechnisms of protection. It can be strong (favoring property rights) or weak (alllowing expropriation)
*'''Patents''' do not confer perfect appropriability: They can be invented around, often at modest costs; They are especially ineffective at protecting process innovations; Legal requirements for upholding their validity or proving their infringement are high
*'''Trade secrets''' may be a viable alternative if the product does not reveal the technology (or it can not be reverse engineered). This is likely to be true when knowledge is tacit, rather than codified.
*'''Preparadigmatic''' - there is no single generally accepted conceptual treatment of a branch of knowledge
*'''Paradigmatic''' - a body of theory appears to have passed the canons of acceptability.
*A '''dominant design''' signals normal "standards" upon which research proceeds
*'''Complementary Assets''': The successful commericialization of an innovation requires that the know-how be used in conjunction with other assets or capabilities for production and distribution
*'''Cospecialized assets''' need relational specific investments from one or both side
[[Thursby Fuller Thursby (2007) - Us Faculty Patenting Inside And Outside The University |Thursby, Fuller and Thursby (2007)]]:
*The '''Professor's privilege''' in Europe allowed faculty ownership of their IP - this is referenced in this paper
[[Ziedonis (2004) - Dont Fence Me In |Ziedonis (2004)]]:
*A '''patent''' is a right to exclude - it does not guarantee the owner the right to use if use infringes on the rights of others.
*The '''anti-commons therory''' is that a large number of exclusionary rights leads to underinvestment
*'''Concentrated rights''' are rights held by only one or a small number of holders
*'''Fragmented rights''' are when rights are dispersed
[[Mowery (2009) - Plus Ca Change |Mowery (2009)]]:
*'''Open Innovation''', as defined by Chesbrough, is: "The purposive use of inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation"
*'''Vertical Specialization''' - is the specialization in one component of the vertical supply chain, and outsourcing of this component
*'''IPAs''' (Institutional Patent Agreements) were used by the NIH and other government funders prior to Bayh-Dole.
==Innovation Market Failures==
[[Arrow (1959) - Economic Welfare And The Allocation Of Resources For Invention |Arrow (1958)]] gives three market failure reasons:
*Indivisibility - may prevent optimum allocation
*Inappropriability - private benefits are less than the social benefits
*Uncertainty - Insurance against risk dulls incentives.
In addition [http://en.wikipedia.org/wiki/Arrow_information_paradox Arrow's information paradox] prevents the transfer of information (though patenting partially solves this), and absent transfer costs the social optimum would be unlimited distribution at a price of zero. Interdependent innovative activity magnifies the problems. And a monopolist has no incentive to innovate. [[Nelson (1959) - The Simple Economics Of Basic Scientific Research |Nelson (1959)]] counters that the long lag between project conception and commercialization would discourage short-term profit seeking firms in a competitive market - therefore monopolists should innovate.
[[Nelson (1959) - The Simple Economics Of Basic Scientific Research |Nelson (1959)]] focuses on the externalities arguments (i.e. we should maximize social profit), at least with respect to basic research, claiming that the "finding that private laboratories do basic research at all is evidence that we should increase our expenditure".
In addition he claims:
*Science makes better citizens,
*Incentives in profit maximizing firms lead to secrecy and so static inefficiency. The marginal cost of using knowledge that already exists is zero, and knowledge is non-rivalous, so knowledge should be contributed to a common pool. But if this is implemented, the incentives to create knowledge will be reduced, leading to dynamic inefficiency.
Basic vs. Applied Research
*There is a continuous spectrum
*applied research is closely constrained
*the goal of basic research is adaptive
*basic research has greater uncertainties
*both are path dependent: "the greater a researcher's relevant knowledge the more likely he will eventually find a satisfactory path"
*Firms with a broader technology base are better suited to more basic research (they can apply results whereever they may lead)
==Why Patent?==
According to [[Ziedonis (2004) - Dont Fence Me In |Ziedonis (2004)]] the primary reasons firms patents are:
*to prevent rivals from patenting
*to use patents in negotiations with owners of outside technologies
*to deter infringement lawsuits
A patent is a right to exclude - it does not guarantee the owner the right to use if use infringes on the rights of others. Firms must consider the price they expect to pay to use technologies patented by others and so should try to improve their ex-post bargaining positions. Capturing economic value directly from the patent is apparently secondary.
They assess hold up problems based on a fragmentation measure and capital intensity (proxying for relational specific investments) and find that firms that have a capital intensive one standard deviation above the mean patent five times more aggressively in response to average levels of fragmentation, even after controlling for R&D and firm size. More importantly, capital-intensive firms do not patent more intensively unless they build upon fragmented technology pools. Furthermore, stricter IP regimes increase the hold-up problem.
[[Merges (1999) - As Many As Six Impossible Patents Before Breakfast |Merges (1999)]] considers the incentives of the PTO and its optimal re-design.
==Transfer of Knowledge from Universities==
[[Agrawal Henderson (2002) - Putting Patents In Context Exploring Knowledge Transfer From Mit |Agrawal and Henderson (2002)]] provide the following list of methods through which faculty transfer knowledge to the outside world (from thier supply side view):
*Mentoring students (who may do research or be recruited, etc)
*Giving conference presentations
*Free publication of ideas in refereed journals (60% of faculty publish each year, accounts for ~18% of knowledge transfer)
*Consulting
*Collaborative research
*Patenting (accounts for ~7% of knowledge transfer, 11% according to Cohen et al.)
Patenting is independent of publishing. But patent are predictors of research citations (i.e. more important research). Patenting and publications are different channels used by different outsiders.
[[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]] study 3 universities' patenting and licensing history circa the Bayh Dole Act. While they do find a change in the volume of patenting, and evidence that 'new' universities are entering the market, they suggest that the effect that can be attributed directly to Bayh-Dole is small, and that the effects were part of broader changes.
[[Murray Stern (2005) - Do Formal Intellectual Property Rights Hinder The Free Flow Of Scientific Knowledge |Murray and Stern (2005)]] find that the size of an anticommons effect is small but statistically significant using Patent-Paper pairs. They have no evidence that basic research tools are effected by property rights.
[[Mowery (2009) - Plus Ca Change |Mowery (2009)]] comments on biotech's relations with univerities in a historical context. This paper also provides the most detailed account of the Bayh-Dole act.
==Patent Events==
'''Year Event or case Result'''
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1787 Legislation Intellectual Property Clause in the US Constitution [[Merges (1999) - As Many As Six Impossible Patents Before Breakfast |Merges (1999)]]
1834 Legislation PTO required to have trained examiners ([[Lamoreaux Sokoloff (2005) - Decline Of The Independent Inventor |Lamoreaux and Sokoloff (2005)]])
1890's Legislation Revisions to Antitrust law [[Mowery (2009) - Plus Ca Change |Mowery (2009)]]
1904 Legislation Supreme Court's Northern Securities limits horizontal mergers [[Mowery (2009) - Plus Ca Change |Mowery (2009)]]
1912 Industry Event Research Corporation founded [[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]
1974 Cohen-Boyer DNA splicing patent is disclosed and licensed to UC and Stanford [[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]
1970's Nixon's War on Cancer more funding to biotech [[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]
1970-5 Industry Event Biotech begins to become a productive field. [[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]
1980 Diamond v Chakrabarty patentability of artificially engineered genetic organisms
1980 Bayh-Dole legislation increase in university patenting(took effect July 1st 1981)
1981 Diamond v Diehr patentability of software
1982 legislation Creation of CAFC; patent validity more likely to be upheld
1986 Kodak-Polaroid Decision on instant camera patent;
final injunction against Kodak leading to $1B judgment
1986 Legislation Federal Transfer Act - authorized federal labs to conduct commercial research [[Mowery (2009) - Plus Ca Change |Mowery (2009)]]
and development agreements (CRADAs) with private firms
1994 TRIPS agreement harmonization drive begins
1998 State Street and ATT vs. Excel patentability of business methods
==History of Innovation== *1870-1911: See [[Lamoreaux Sokoloff (2005) - Decline Of The Independent Inventor |Lamoreaux and Sokoloff (2005)]]*circa 1980: For university research see [[Mowery Ziedonis (2001) - How Has The Bayh Dole Act Affected Us University Patenting And Licensing |Mowery and Ziedonis, (2001)]]*1900-2000: See [[Mowery (2009) - Plus Ca Change |Mowery (2009)]] ==Non-Inline References==
*Hall, B.H. (2004), "Exploring the Patent Explosion", NBER working paper #10605. [http://www.edegan.com/pdfs/Hall%20(2004)%20-%20Exploring%20the%20Patent%20Explosion.pdf pdf]
*Schumpeter, J.A. (1911), "The Theory of Economic Development", Chaps. 2, 4, 6.
*Schumpeter, J.A. (1950/1942), "Capitalism, Socialism & Democracy", pp. 81-163. [http://www.edegan.com/pdfs/Schumpeter%20(1950),%20Capitalism%20Socialism%20and%20Democracy.pdf pdf]
