economics of patents in the 21st century? do we …...“distributional” (north vs. south) - 1995:...

© Meir P. Pugatch 2012, The unauthorized use of this presentation is forbidden

Prof. Meir Perez Pugatch

University of Haifa

Economics of Patents in the 21st Century?

Do We Need a Paradigm Shift?

Inter-Regional Seminar on

Economic Issues of Intellectual Property Rights

September 2012

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Some figures to begin with – volume!

© Meir P. Pugatch 2012

USPTO Patent Applications and Grants

0

100000

200000

300000

400000

500000

600000

Y2010Y2005Y2000Y1995Y1990Y1980Y1970Y1963

Applications

Grants

Grants Applications USPTO

244341 520277 Y2010

157718 417508 Y2005

175979 315015 Y2000

113834 228238 Y1995

99077 176264 Y1990

66170 112379 Y1980

67964 109359 Y1970

48971 90982 Y1963 2

Some figures to begin with – what does this say

about quality of patents?


USPTO annual grants ratio (of total applications)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Y2010Y2005Y2000Y1995Y1990Y1980Y1970Y1963

Grants ratio

3

Some figures to begin with – internationalization


50484543

47

38

27

18

0

10

20

30

40

50

Y2010Y2005Y2000Y1995Y1990Y1980Y1970Y1963

% of USPTO patents granted to foreign nationals

4

EPO-granted patents

5

Innovation is still based in the “developed world”


OECD Science and Technology Scorecard 2011

ZAF

USA

TUR

SWE

SVN

SVK

SAU

RUS

PRT

POL

OECD

NZL

NOR

NLD

MEX

LUX

KORJPN

ITA

ISR

ISL

IRL

IND

HUNGRC

GBR

FRAFIN

EU27

EST

ESP

DNK

DEU

CZE

CHN

CHL

CHE

CAN

BRIICS

BRA

BEL

AUTAUS

ARG

0

1

10

100

1 000

0 1 10 100 1 000

Triadic patent families per capita

Trademarks abroad per capita

IDN

Axes in logarithmic scale

6

AUS

AUT

BEL

CANCHLCZE

DNK

EST

FIN

FRA

DEU

GRCHUN

ISL

IRL

ISRITA

JPNKOR

LUX

MEX

NLD

NZLNOR

POLPRT

SVK

SVN

ESP SWE

CHE

TUR

GBR

USA

BRA

CHN

IND

RUS

0

20

40

60

80

0 20 40 60 80

OECD - International collaboration in science and innovation, 2007-09

International co-inventions (%)

International co-authorship (%) - PCT applications

Collaboration is increasing, but still inconsistent


7

The unique nature of knowledge

Knowledge is NOT

inherently scarce

Knowledge is a PUBLIC GOOD (non-rival; non-excludable)

Modern economics

deals with the

problem of scarcity

BUT THIS IS ALSO THE PROBLEM!


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• Free-riding (Arrow, 1962)

• Secrecy

• Industrial segmentation (advantage to economies of scale)

Problems caused in the absence of IP protection

Underproduction of inventions

Problems deriving from IP protection

Artificial scarcity: “the establishment of private property rights in

these cases (knowledge) artificially creates the symptoms of scarcity;

they do not derive from it” (Hindley,1971)

Pros and cons of patents


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Access

Goals of IP Policy

Incentive for innovation

‘Paradox of patents’: by slowing down the diffusion of technical

progress, patents ensure that there will be more progress to

diffuse (Robinson, 1956)

THIS IS NOT AN EASY TASK!

Policy of patents - a ‘double-edged’ sword?


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-19th Century: Europe – philosophical, economic and social

-Mid 20th Century: United States – industrial

-Mid 1970s: Developing countries (UNCTAD) –

“distributional” (north vs. south)

-1995: Global debate (post-TRIPS era) – all of the above + are

patents really a proxy for “real” innovation and value creation? (too much

patenting?)

Debates on patents are not new

21st Century Patent Debates


The battle over “INNOVATIVITY”

(innovation and creativity

combined)

11

New debates/challenges

Patent trolls

• Patents as a tool for “extortion”

• No real intention for industrial application/progress

• Systemic abuse

• Slow technological progress rather than enhance it


12


Patent wars

• Patents as a WMD (the patenting arms race)

• Clash of the titans (Google, Apple, Samsung…)

• Collaboration “out” – confrontation “in”

• Patent thickets (ICT)


13


Patent quality

• Incremental innovation or ever-greening (pharma)?

• The “inventive step” threshold

• System overload leads to superficial examination?


14


Standards and patents – the new frontier

• Standards replace the role of platform technologies

(mobile, IT, web, firewalls, voice over IP, interface, etc)

• “Standards-essential” patents are the closest thing to

a pure monopoly

• SSOs are becoming increasingly aware about the role

of patents

• Disclosure requirements and royalties based on

FRAND are pivotal


15

Patents obsolete or still essential?

• Technological innovation - Innovation models and the role

of incentive and distribution mechanisms

• The pros and cons of “one-size fits all” vs. “flexible”

models (“discretionary models”)

• So called open platforms, how effective are they really?

(Linux)

• Have the fields of technology expanded beyond any point

of convergence (mechanics, pharma, mobile, web)?

• Do patents expedite or slow the pace of technological

progress (compared to what?)?


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Yes, patents are still essential!

• Still the most practical and effective way to create

incentives and to facilitate access

• The tests of “inventiveness” are far more robust than any

other model (despite the flaws)

• The model is transparent, non-discriminatory and does

NOT change with the ‘flavor of the month’

• The bottom line is that today more than ever, new

innovations still rely on, seek and use patent protection

• A major tool for facilitation and sharing of knowledge (as

opposed to keeping innovations secret)

BUT, changes are needed! 17

Systemic changes are needed

• Examination process and scope of rights needs to differ

from one field to another

• Duplication of examination resources needs to be reduced

significantly (one examination, grant in multiple jurisdictions)

• Introduce another test – the “self development test” (to

fight patent trolls and “patent traders”)?

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I knew that a country without a

patent office and good patent

laws was just a crab,

and couldn't travel any way but

sideways or backways.

Mark Twain

A Connecticut Yankee in King Arthur's Court

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Prof Meir Perez Pugatch (MSc, PhD)

University of Haifa, School of Public Health

Address: [email protected]

[email protected]

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economics of patents in the 21st century? do we …...“distributional” (north vs. south) - 1995:...

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