Fragmented property rights and R&D competition

Where product innovation requires several complementary patents, fragmented property rights can be a factor that limits firms’ willingness to invest in the development and commercialization of new products. This paper studies multiple simultaneous R&D contests for complementary patents and how they interact with patent portfolios that firms may have acquired already. We also consider how this interaction and the intensity of the contests depends on the type of patent trade regimes and the product market equilibria that result from these regimes. We solve for the contest equilibria and show that the multiple patent product involves an important hold-up problem that considerably reduces the overall contest effort

Patent thickets, licensing and innovative performance

We examine the relationship between fragmented intellectual property (IP) rights and the innovative performance of firms, taking into consideration the role played by in-licensing of IP. We find that firms facing more fragmented IP landscapes have a higher probability of in-licensing. For firms with small patent portfolios we also find a positive association between fragmentation and licensing costs as a share of sales. We observe a negative relationship between IP fragmentation and innovative performance, but only for firms that engage in in-licensing. In contrast, greater IP fragmentation is associated with higher innovative performance for firms that do not in-license. Furthermore, the effects of fragmentation on innovation also appear to depend on the size of a firm’s patent portfolio. These results suggest that the effects of fragmentation of upstream IP rights are not uniform, and instead vary according to the characteristics of the downstream firm. --patent thickets,licensing,innovative performance

Tragedy of the Regulatory Commons: LightSquared and the Missing Spectrum Rights

The endemic underuse of radio spectrum constitutes a tragedy of the regulatory commons. Like other common interest tragedies, the outcome results from a legal or market structure that prevents economic actors from executing socially efficient bargains. In wireless markets, innovative applications often provoke claims by incumbent radio users that the new traffic will interfere with existing services. Sometimes these concerns are mitigated via market transactions, a la “Coasian bargaining.” Other times, however, solutions cannot be found even when social gains dominate the cost of spillovers. In the recent “LightSquared debacle,” such spectrum allocation failure played out. GPS interests that access frequencies adjacent to the band hosting LightSquared’s new nationwide mobile network complained that the wireless entrant would harm the operation of locational devices. Based on these complaints, regulators then killed LightSquared’s planned 4G network. Conservative estimates placed the prospective 4G consumer gains at least an order of magnitude above GPS losses. “Win win” bargains were theoretically available, fixing GPS vulnerabilities while welcoming the highly valuable wireless innovation. Yet transaction costs—largely caused by policy choices to issue limited and highly fragmented spectrum usage rights (here in the GPS band)—proved prohibitive. This episode provides a template for understanding market and non-market failure in radio spectrum allocation

Fragmented Laws, Contingent Choices: The Tragicomedy of the Village Commons in China

Defining the direct conflict between law and social norms as a tragedy and their reconciliation as a comedy, this paper serves as a case study of the mixture of tragedies and comedies of collective land governance in China. The term tragicomedy encapsulates such a mixture. This paper presents two contrasting cases of collective land governance: one village co-op is captured by a mafia and the consequent mafia-style land development business is maintained through violence and the bribing of government officials; the other village co-op from time to time takes actions “in the name of law” in their bargaining for legal property rights with the government and with a hold-out couple who refused to submit their “nailhouse” to the village co-op for redevelopment. This paper reveals that the different identities that village leaders simultaneously assume under different social control systems are key to understanding the co-evolution of property law and norms. It also highlights the essential roles of the laws and communities’ legal strategies in governing common-pool resources

The Political Economy of Intellectual Property Treaties

Intellectual property treaties have two main types of provisions: national treatment of foreign inventors, and harmonization of protections. I characterize the circumstances in which countries would want to treat foreign inventors the same as national inventors. I then argue that national treatment of foreign inventors leads to stronger intellectual property protection than is optimal, and that this effect is exacerbated when protections must be harmonized. However levels of public and private R&D spending will be lower than if each country took account of the uncompensated externalities that its R&D spending confers on other countries. The stronger protections engendered by attempts at harmonization are a partial remedy.