Cumulative Innovations : Intellectual Property Regimes and Incentives to Innovate

When innovations are both sequential and complementary as in the software or the semi-conductor industries, James Bessen and Eric Maskin (2002) argue that patents are likely to reduce firms ’ incentives to innovate as compared to a regime with no protection. We develop a model close to that of Bessen and Maskin except that we endogenize the probability of success of each innovation (firms choose their R&D investments, reflecting the incentives to innovate and determining the success probability of an R&D program) and introduce an explicit model of a copyright. Our main results contradict Bessen and Maskin: individual and aggregate R&D ∗We thank Matti Liski, Pauli Murto, Otto Toivanen, and Juuso Välimäki for help and useful comments

A Comment on “Do Patents Facilitate Financing in the Software Industry?”

“Do Patents Facilitate Financing in the Software Industry?” by Ronald J. Mann contributes empirical evidence to our understanding of how software startups use patents. However, a close examination of the actual empirical findings in this paper points to rather different conclusions than those that Mann draws, namely: few software startups benefits from software patents and patents are not widely used by software firms to obtain venture financing. Indeed, among other things, the paper reports that 80% of venture-financed software startups had not acquired any patents within four years of receiving financing.

Patent Thickets: Strategic Patenting of Complex Technologies

Patent race models assume that an innovator wins the only patent covering a product. But when technologies are complex, this property right is defective: ownership of a product’s technology is shared, not exclusive. In that case I show that if patent standards are low, firms build “thickets” of patents, especially incumbent firms in mature industries. When they assert these patents, innovators are forced to share rents under cross-licenses, making R&D incentives sub-optimal. On the other hand, when lead time advantages are significant and patent standards are high, firms pursue strategies of “mutual non-aggression.” Then R&D incentives are stronger, even optimal.

Sequential Innovation, Patents, and Imitation

We argue that when discoveries are "sequential" (so that each successive invention builds in an essential way on its predecessors) patent protection is not as useful for encouraging innovation as in a static setting. Indeed, society and even inventors themselves may be better off without such protection. Furthermore, an inventor's prospective profit may actually be enhanced by competition and imitation. Our sequential model of innovation appears to explain evidence from a natural experiment in the software industry.

Knowledge Sharing among Inventors: Some Historical Perspectives

This chapter documents instances from past centuries where inventors freely shared knowledge of their innovations with other inventors. It is widely believed that such knowledge sharing is largely a recent development, as in open source software. Our survey shows, instead, that innovators have long practiced "collective invention", including in such key technologies as steam engines, iron and steel production and textile machinery. Generally, innovators? behavior was substantially richer than the heroic portrayal often found in textbooks and museums. Knowledge sharing sometimes coexisted with patenting, at other times, not, suggesting the importance of public policy that accommodates knowledge sharing to foster cumulative innovation.technological change, knowledge sharing, collective invention, patents

The software patent experiment.

Over the past two decades, the scope of technologies that can be patented has been expanded to include many items previously thought unsuitable for patenting, for example, computer software. Today, the U.S. Patent and Trademark Office grants 20,000 or more software patents a year. Conventional wisdom holds that extending patent protection to computer programs will stimulate research and development and, thus, increase the rate of innovation. In "The Software Patent Experiment," Bob Hunt and Jim Bessen investigate whether this has, in fact, happened. They describe the spectacular growth in software patenting, who obtains patents, and the relationship between a sharp focus on software patenting and firms' investment in R&D.Patents

What Patent Attorney Fee Awards Really Look Like

This Essay provides an empirical account of attorney fee awards over the last decade of patent litigation. Given the current attention in legislative proposals and on the Supreme Court’s docket to more liberal fee shifting as a check on abusive patent litigation, a fuller descriptive understanding of the current regime is of utmost importance to forming sound patent-litigation policy. Following a brief overview of judicial experience in patent cases and trends in patent-case filing, this study presents analysis of over 200 attorney fee award orders from 2003–2013

An empirical look at software patents

U.S. legal changes have made it easier to obtain patents on inventions that use software. Software patents have grown rapidly and now comprise 15 percent of all patents. They are acquired primarily by large manufacturing firms in industries known for strategic patenting; only 5 percent belong to software publishers. The very large increase in software patent propensity over time is not adequately explained by changes in R&D investments, employment of computer programmers, or productivity growth. The residual increase in patent propensity is consistent with a sizeable rise in the cost effectiveness of software patents during the 1990s. We find evidence that software patents substitute for R&D at the firm level; they are associated with lower R&D intensity. This result occurs primarily in industries known for strategic patenting and is difficult to reconcile with the traditional incentive theory of patentsPatents