The Tragedy of Under-Innovation : Intellectual Property Rights and the Anticommons A Review of the...
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Transcript of The Tragedy of Under-Innovation : Intellectual Property Rights and the Anticommons A Review of the...
The Tragedy of Under-Innovation: Intellectual Property
Rights and the Anticommons
A Review of the Literature
Annabelle BerklundColorado State University
February 25th, 2015AUTM 2015 Annual Meeting
Research Question and Motivations
Can intellectual property rights stifle, rather than encourage
innovation?
Examples: Tesla released patents Myriad Case
How Do Economists View Patents and Innovation?
Patents allow research entities to appropriate some of the value of their discoveries increased incentives to conduct R&D
Patents allow firms to act as a gatekeeper and encourage follow-on innovations, including tacit know-how
Patents create a tradeoff between incentives and efficiency
U.S. Patent examiners have perverse incentives increased patenting in U.S.
What is the Tragedy of the Anticommons?
A situation in which multiple owners each have exclusion rights over a scarce resource and no one has an effective privilege of use (Heller, 1998)
Property rights over a single component of a complex technology lead to over fragmentation of rights and increase transaction costs
Results in underinvestment, underdevelopment and underuse
Anticommons and Intellectual Property
• Several patent holders have exclusionary rights over their invention
• Follow-on inventions must negotiate licenses to use previous invention
• If negotiations fail fewer inventions make it to the market under-innovation
• This problem increases as the complementary and sequential nature of inventions increases
Heuristic Examples of Intellectual Anticommons
Biomedical Research (Heller and Eisenberg, 1998)
Gene fragment patents
Oncomouse and Cre-Lox
Reach Through License Agreements
Agricultural Biotechnology (Graff, et. al 2003)
Plant genetic engineering and market consolidation
Energy Innovations (Cahoy and Glenna, 2009) + ME!
Advanced ethanol-based biofuels
Why does this matter?
Inefficient licensing markets difficulty in out-licensing and lower
survival and success rates for startup companies
Theoretical Economic Models of the Anticommons
Largely addresses bargaining and transaction costs for patent rights post invention discovery by private firms who are assumed to appropriate all patent royalties (Buchanan & Yoon, 2000; Bessen & Maskin; 2009, Comino, Manenti, Nicolo (2011), D’Agata (2012)).
Asymmetric information between upstream and downstream innovators (Bessen (2004), Bessen and Maskin (2009).
Divergent expectations about payoffs from patents inefficient license bargaining (Galasso, 2012, Priest and Kliein 1984).
Empirical Tests of the Anticommons
…are largely inconclusiveHow do you test the counter factual?
Empirical techniques include: Changes in follow-on citation rates
Human Genetics (Murray and Stern, 2007; Murray and Huang, 2009)
5-10% decrease in citation rates following patent grant
Patent Invalidations (Galasso and Schankerman, 2013) Patent invalidation leads to an average increase of 50% in subsequent
citations
Fragmentation Index Semiconductor Industry (Ziedonis, 2004)
Capital intensive firms patent 5+ times more aggressively when markets for technological inputs are highly fragmented
Proposed Solutions“avoiding tragedy requires overcoming
transaction costs, strategic behaviors, and cognitive biases of participants” (Heller and Eisenburg,
2001).
Legal Limit patent breadth; improve patent quality
Private Ordering or Collective Action Mechanisms Patent pools, brokers & cross-licensing
Collaborations and partnerships
Clearing houses
All of these require some monetary or effort costs, which reduce, but do not eliminate, transaction cost
The Role of University Research and TTOs
• Can public university’s missions and practices help prevent or supersede the incursion of the anticommons?
• Could the use of public domain mechanisms help remove transaction costs?
• Are universities better suited to form collective action mechanisms than industry?
• Does the private return from patenting justify the opportunity cost of sharing knowledge in the public domain and allowing spillovers?
BibliographyBessen, J., & Maskin, E. (Jan 2009). Sequential Innovation, Patents, and Imitation. RAND Journal of Economics, 40 (4),
611-635.Buchanan, James, and Yong Yoon. “Symmetric Tragedies: Commons and Anticommons,” Apr 2000. Journal of Law and
Economics: 43(1): 1-13.Cahoy, Daniel and Leland Glenna. “Private Ordering and Public Energy Innovation Policy,” Mar 2009. Florida State
University Law Review: 36(3): 415-458.Comino, S., Manenti F.M., Nicolò, A. (Nov 2011). Ex-ante licensing in sequential innovations, Games and Economic
Behavior,73(2), 388-4. Comino, S., F. Manenti, & A. Nicolò. (Nov 2011). Ex-ante licensing in sequential innovation. Games and Economic
Behavior, 73(2), 388-401Filipe, J.A., Ferreira, M.A., Coelho, M. & Pedro, I. (Jul 2011). Modeling Anti-Commons. The Case of Fisheries.
International Journal of Academic Research, 3(4), 456-460.D’Agata, Antonio. “Geometry of Cournot-Nash Equilibrium with Application to Commons and Anticommons,” 2010.
The Journal of Economic Education: 41(2): 169-176. Galasso, A. and M. Schankerman (2013). Patents and Cumulative Innovation: Causal Evidence from the Courts. CEP
Discussion Paper No 1205 Heller, Michael. “The Tragedy of the Anticommons: property in the Transition from Marx to Markets,” Jan 1998.
Harvard Law Review: 111 (3): 621-688.Heller, M.A. & Eisenberg, R.S. (1998). Can Patents Deter Innovation? The Anticommons in Biomedical Research.
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Innovation and Progress, and What to Do About it. Princeton University Press. Lach, S. & Schankerman, M., (2008). Incentives and Invention in Universities. The RAND Journal of Economics, 39(2),
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