Economics of Innovation Patents Manuel Trajtenberg 2005

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Economics of Innovation

Patents

Manuel Trajtenberg2005

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What are patents all about?•A patent is a legal document that grants monopoly rights over a specific innovation for a specified period of time (~ 20 years).

• Why? To provide incentives to innovate: if inventions could be copied, nobody will incur the fix costs of developing it.

• So important that specified in the US Constitution.

•Patents involve a deal: monopoly rights in exchange for disclosure – that further promotes innovation.

•As R&D and innovation become more important in the industrialized world, patent protection gains in stature.

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Patents as mechanism of appropriability

• Innovation: creation of new Knowledge

• Nice/nasty property of Knowledge: it leaks out easily!

• Costs of copying knowledge usually very low

• Hence need protection in order to reap benefits from innovation =>

Need appropriability mechanisms

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Other mechanisms of appropriability

• Secrecy

• Lead Times

• Monopoly power in the field – barriers to entry

Patents – important in pharmaceuticals and chemicals, less in other industries

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Additional roles of patents

• Tool for mutual deterrence

• Tool for transfer/trade in technology, e.g. from Universities, from

individual inventors/start ups.

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Patent Policy

• Scope of what’s patentable: business methods, gene sequences…

• “Size” (breath) of patents

• How/when to allow for opposition/ appeals?

• Whether and when to disclose applications.

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International Issues

• Harmonization (e.g. first to file vs. first to invent)

• Pharmaceutical patents in third world countries.

• Enforcement.

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Patents as depositories of wealth of information on innovation

• Very detailed information, millions of patents

• Can study countries, firms, inventors;

• Can study links over time and across geography and institutions.

(see front page of patent)

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Front page of patent (partial)United States Patent 6,539,988

Pressurized container adapter for charging automotive systems

Inventors:

Cowan; David M. (Brooklyn, NY); Schapers; Jochen (New York, NY); Trachtenberg; Saul (New York, NY); Nikolayev; Nikolay V. (Flushing, NY)

Assignee: Interdynamics, Inc. (Brooklyn, NY)

Filed: December 28, 2001

Current U.S. Class:141/67; 137/614.04; 141/351; 251/149.1

Intern'l Class: B65B

Primary Examiner: Douglas; Steven O. Attorney, Agent or Firm: Levisohn, Lerner, Berger & Langsam LLP

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Front page – cont.References Cited

3131733May., 1964Monahon.

3448779Jun., 1969Horwitt.

3907012Sep., 1975Burke.

3976110Aug., 1976White.

4644982Feb., 1987Hatch.

4903741Feb., 1990Ibanez141/350.

4995417Feb., 1991Naku.

5248125Sep., 1993Fritch et al.

5609195Mar., 1997Stricklin et al.141/346.

5626173May., 1997Groult.

6079444Jun., 2000Harris et al.137/614.

6296228Oct., 2001Knowles et al.

6360795Mar., 2002Bothe et al.141/346.

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Patent Citations: Spillovers, Importance

Compaq4/1995

TX

Intel11/1996

AZ IBM3/1997

TX, FL

Compaq7/1995

TX

Compaq10/1998

CA

spillovers

importance

“Self-citations”

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Number of USPTO Patents by Application Year

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

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US patents granted, by grant year  Pre 199019992000200120022003All Years

Total, U.S. And Foreign Origin 18155311534861574941660371673331690283583813

-- Subtotal -- U.S. Origin 118212483906850688760586972879012132534

-- Subtotal -- Foreign Origin 63340769580724267843280361811271451279

JAPAN 1843483110431295332243485935517556335

GERMANY 146010933710235112591128011444265313

UK 7082535723667396538373627113109

FRANCE 5472538203819404140353869101163

CANADA 311443226341936063431342667753

SWITZERLAND 313861279132214201364130848728

TAIWAN 23413693466753715431529840746

ITALY 196001492171417091751172239328

SWEDEN 196811401157717411675152134800

NETHERLANDS 173531247124113321391132531978

SOUTH KOREA 5993562331435383786394429437

AUSTRALIA 640270770587585990014725

BELGIUM 656764869471872262213728

AUSTRIA 659547950558953059212476

ISRAEL 28777437839701040119311364

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Distribution of Patents by Technological Categories – Shares

0%

5%

10%

15%

20%

25%

30%

Application Year

Chemical Cmp&Cmm Drgs&Med Elec Mech Others

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Citations Received by Technological Categories

0

2

4

6

8

10

12

14

Application Year

Me

an

Cit

ati

on

Chemical Cmp&Cmm Drgs&Med Elec Mech Others

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Israeli Patents in the USby Application Year

0

100

200

300

400

500

600

700

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

Application Year

Pat

ents

Iss

ued

1983 : 151

1987 : 295

1991 : 312

1995 : 613

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Patents per Capita: Israel vs. the G7

0

5

10

15

20

25

30

19701971

19721973

19741975

19761977

19781979

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

(patents per 100,000 population)

USAJapan

GermanyIsrael

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Patents Per Capita: Israel vs. Reference Group

0

2

4

6

8

10

12

Pat

/ Popu

latio

n

Israel

Finland

Ireland

New Zealand

Spain

(patents per 100,000 population)

Israel

Finland

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Patents Per Capita: Israel vs. the NIC

0

2

4

6

8

10

12

14

19701971

19721973

19741975

19761977

19781979

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

Pat

/ Popu

lati

on

Israel

Hong Kong

Singapore

South Korea

Taiwan

(patents per 100,000 population)

Israel

TaiwanSouth Korea

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US vs. Israel Patents: Technological Categories

0%

5%

10%

15%

20%

25%

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

Mechanical Chemical Drugs & Medicine Computers &Communications

0%

5%

10%

15%

20%

25%

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

US Distribution Israeli Distribution

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Distribution of Israeli Assignees Types3-year moving average

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Corp

Gov

Unv

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Relative "Importance" of Israeli Patents by Tech Category(from regression results)

-1.5

-1

-0.5

0

0.5

1

1.5

USA

Reference Group

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Spillovers and geography

QJE 1993

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The Sample

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Results – country localization

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Results: State and SMSA

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The “fading” over time of geographic localization

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Patents in CT

30

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Patents and R&D