A S Tudy In

  • P ROPERTY R IGHTS, Patents M ALONEY
  • Published 1999

Abstract

Assume that an innovation occurs such that the cost of process B falls. Further assume that there is the possibility of copy-cat inventions that achieve a similar level of cost savings in process B. There are several different patent regimes that might be put into place. 1. No patent right protection. 2. Patent protection for a period of t years; copy-cat patents can be merged. 3. Patent protection for a period of t years; copy-cat patents cannot be merged. 4. Patent protection of unlimited duration; copy-cat patents cannot be merged. The issue of patent rights hinges on the question of efficiency. That is, what is the efficient compensation for innovation. Knowledge is a public good. As such, it has no marginal cost of production for the marginal consumer. However, this does not mean that the marginal consumer should pay zero, or that the optimal license for the patent be zero. Nonetheless, it is true that the question of the efficient price is somewhat arbitrary. Efficiency overall requires that the total payment made for invention equal its marginal cost. Recall Demsetz’ example of movies and Coase’s examples of lighthouses in the discussion of the optimal supply of a public good. The problem of applying the public good model to patents, especially using the metaphors of movies and lighthouses, is that we tend to think of patents as unique things. While it seems reasonable to treat movies, which are copyrighted, as identical products, it attacks our sensibilities to do the same for patents. However, in the case of copy-cat patents, there are some intriguing similarities. We tend to think that because there are multiple ways of saying something, it is not wasteful to have multiple literary works on the same theme. Indeed, we have millions of literary attempts to capture the same idea. On the other hand, many people, either implicitly or explicitly, argue that if one invention does something, then it is wasteful to have others that accomplish the same thing. On closer inspection, this does not seem so clear. Consider a couple of examples: a) Vending machinespaper clip model v. spiral. b) Guns. c) Variable speed windshield wipers. d) Locomotive steam engines. In all of these cases, there are/were competing methods of achieving the ultimate consumption product. One or the other seems to have been the best, but there are alternatives. We cannot be sure that any property rights system will render the efficient level of compensation for these innovations, in the same way that we cannot be sure that the efficient

Cite this paper

@inproceedings{IGHTS1999AST, title={A S Tudy In}, author={P ROPERTY R IGHTS and Patents M ALONEY}, year={1999} }