Comments for Do patent rights facilitate or impede cumulative innovation? Coudray Morgane 16 February 2018 Like Newton said, every major innovation is inspired by several others. That's what we called cumulative innovations. Whether sequential or complementary (based on an artice written by Paul Belleflamme, “A primer on cumulative innovation”), all innovations are based on old. We all know that the patent system is an evil necessary, as many authors like to call it. It allows first…Read moreLike Newton said, every major innovation is inspired by several others. That’s what we called cumulative innovations. Whether sequential or complementary (based on an artice written by Paul Belleflamme, “A primer on cumulative innovation”), all innovations are based on old. We all know that the patent system is an evil necessary, as many authors like to call it. It allows first of all to avoid the well-known tragedy of the commons, which refer to the fact that a ressource can be overused if she’s not well protected. It also give the good incentives to people who wants to create some new technologies by giving them the insurance of a temporary monopoly of using. But let’s return to the problem of cumulative innovations, is patent system facilitate or impede this phenomenon ? The patent system give to the inventor the right to produce (or not) his product, but it also give him the right to deliver licences. As the owner of the patent, he has the power to choose with who he is gonna work and who can be authorised to use his innovation. It’s a way to reduce the diffusion of the innovation, especially if the futur inventors have to wait until the end of the protection. It also have a cost, like a transaction cost, mostly if the inventor need several licences to start his production. And, obviously, sometimes, the addition of this costs is higher than the expected profit, an other phenomenon that discouraged innovation. There’s solutions to that problems, like pools of patent and cross-licencing, but it’s fixing the problem after its appearance, so why not fix it at its source ? Galesso and Schankerman tried to determinate empirically the real impact of the patent system on the cumulative innovations. They managed to fix three main problems that comes with an empirical experience and their results let’s to think that the invalidation of a patent would increase the rate of cumulative innovations. So, to conclude, I think we can say that patent system is imperfect and in this case, is impeding cumulative innovations that are so important to economy. We can also observe this pattern in other situations, like in the medical industry, where several companies own patent on drugs or on their composition. This informations could be used by others and lead to develop some treatments faster and probably save lifes, but the patent system give the right to this companies to keep their researchs secret and protected during a time, allowing them to sell themselves, and only them, the treatment. We can also quote some situations about land ownership. Heller talked about a situation (in his article “The tragedy of anti-communs”, 1998) after the fall of communism, where several cities had empty and unexploited premises. The traders on the spot would have wanted to used them but because of the system of propriety, that protect the owner, it was hard for them to get the right to use this unexploited places. Although all the owners of the spaces were losing money with the empty stores, while the commercial areas were in great demand, their competing interests prevented the effective use of the space. In conclusion, the patent system is uneffective about cumulative innovations, but is that due to the system himself or to the bad use of this one ? Some authors advanced the theory that this problems actually came from the large number of patent on the market, a hypothesis which would benefit from being thorough. Show less Reply messad 16 February 2018 There are various intellectual justifications for the patent system. In the old days ; The legitimate protection of the rights of inventors was put forward, in the modern era that of investments in R & D. Macro reasoning, finally, insists that protecting the rights of creators provides a powerful incentive for innovation, in which case what is the optimal patent…Read moreThere are various intellectual justifications for the patent system. In the old days ; The legitimate protection of the rights of inventors was put forward, in the modern era that of investments in R & D. Macro reasoning, finally, insists that protecting the rights of creators provides a powerful incentive for innovation, in which case what is the optimal patent when innovations are cumulative? and what is the impact of the patent on innovation? A first position is to defend a patent extended to all innovations following a first discovery. By entrusting the first innovator with the exclusivity of deepening a technological direction, this patent gives him the power to organize research efficiently. The threat of an infringement lawsuit makes it possible in particular to avoid patent races and the excessive investments that characterize them. In addition, the patent being published, it allows other firms to identify new applications, which can be offered to the owner of the patent. The latter is interested in licensing its technology or establishing research partnerships, as long as it can benefit. It results from the deepening of research by other firms the problem of the hold up. To avoid this situation, the owner of the patent and these firms must be able to conclude ex-ante agreements in the form of a joint venture for example. Such agreements make it possible to set the mode of benefit sharing before the investment is made. These are very difficult agreements between the two parties because they have to agree on results that are still very uncertain. On the other hand, the facts seem to show that a deep patent tends to slow down innovation. In the electrical bulb industry, for example, technical progress has slowed significantly over the life of Edison’s patent on the use of a carbon filament as a light source. It was the same in aeronautics, following the Wright Brothers’ patent on a system for stabilizing and piloting aircraft. In the face of this finding, an opposite position is to suppress intellectual property when innovations are cumulative. In that case ; innovators are forced to compete with direct competitors, which reduces their incentives to invest. But in part, they can draw freely on all existing innovations, and thus innovate without fear of infringing a patent Bessen and Maskin argue that for innovators, the shortfall caused by increased competition can be offset by the lack of long-term sharing of available technology. Free software development gives an example close to this form of organization. However, it is an innovative model of innovation in many other respects, which makes it difficult to transpose to other sectors. In the field of biotechnology, where a more significant part of knowledge is produced as part of public research, the OECD is concerned about the trend to privatize their results, which can make it more difficult, access to knowledge, for researchers. “In some upstream sectors, such as genetic material or genetic testing, there are cases where patents may still hinder access to technology. In a context of scientific competition between institutions, the tendency of universities to patent their research poses another problem, calling into question the principle of exemption, which allows the use of existing inventions for the purposes of research. In both informatics and biotechnology, innovation has a fairly pronounced cumulative character, and overly broad protection of basic inventions may discourage inventors from taking over if the legal owner of an essential technology to access it in reasonable conditions; this is particularly shown by the work of Bar-Shalom and Cook-Deegan in the field of oncology. Two recent studies have challenged the very culture of the patent system. Mark Lemley, a law professor at Stanford, enjoys the myth of the solitary inventor. Hundreds of new technologies are developed simultaneously or almost by two or three teams working independently of each other, and invention is a social phenomenon, not an individual phenomenon. “Inventors build on the work of those who preceded them, and new ideas are often already in the air, resulting in changes in demand or the availability of a new market.” Two other researchers, Bill Tomlinson and Andrew Torrance, tested different hypotheses using a “serious game” called PatentSim. The test stages about threeenvironments: in the first patents are ubiquitous, the second is patent-free and the third mixed. In these three environments, students must generate innovation, file patents, assign, infringe and defend them. In the end, mixed environments as well as environments where patents were ubiquitous show similar results in terms of value creation, while the patent-free environment generates more innovation, higher productivity … and much more usefulness social innovation. In the meantime, on September 12, 2011, the US Senate adopted a patent reform that changed the American system from the first to invent one to the first to register its invention. And thereby reinforces the hold of patents. Sources : Economie de la propriété intellectuelle : Francois lévéque ;Yann Meniére p 45 Patents and Innovation in Cancer Therapeutics: Lessons from CellPro”, The Milbank Quarterly, 80, 4). https://papers.ssrn.com http://creativecommons.org/licenses/byncnd/3.0/us/ http://money.cnn.com/2011/09/09/technology/patent_reform_bill/ Show less Reply Guilhem Delon 15 February 2018 Legal protection of cumulative innovation is a major problem in the field of intellectual property because a large number of inventions have multiple applications. Most industries today are part of a process of incremental progress. While current inventions allow the emergence of new products, they are at the same time the bedrock of future innovations. The patent regulation then plays…Read moreLegal protection of cumulative innovation is a major problem in the field of intellectual property because a large number of inventions have multiple applications. Most industries today are part of a process of incremental progress. While current inventions allow the emergence of new products, they are at the same time the bedrock of future innovations. The patent regulation then plays a crucial role since it is for the legislator to balance the interests of the “pionnier” innovator with the interests of innovators of subsequent generations in order to provide them with the best possible incentives. If patents are very extensive, pioneers are encouraged to develop their innovations, but this to the detriment of innovators of subsequent generations. If patents are restricted, the situation is reversed. How to encourage one without disincentive the other? What kind of patent regulation need to be in place to provide the best incentives for innovation? some authors like Edmund W. Kitch and Chang H.F believe that legislation that favors a broad patent conferring a monopoly for the pionnier innovator will have a beneficial effect on incentives to innovate. On the other hand, authors such as Robert P. Merges and Richard R. Nelson take the opposite position and explain that such legislation has detrimental effects on the incentives to innovate. They evoke arguments that complement those contained in the article. Edmund W. Kitch was one of the first authors to propose, in 1977, a complete theory of the role of patents in cumulative innovations. It relies on the “tragedy of commons” to explain that while information is not subject to scarcity, this is not the case for resources available to manage this information. He emphasizes that giving the pioneer innovator an exclusive right to exploit his technology allows him to better coordinate his future research and development efforts. In this case, no one can invest in the development of his technology without obtaining permission. Competitors will be encouraged to share information instead of getting tired of working individually in a discreet manner without taking into account the efforts of others. This coordination phenomenon thus makes it possible to “optimize the flow of innovations over time” as stated by Bruno Deffains. Chang H.F extends the work initiated by Kitch by presenting another argument in the same direction. He observes the existence of a distortion between the “social value” of the pioneer’s innovation and its “intrinsic value”. For him, an invention may have a low value for itself but an important social value if it opens the door to future progress. As a result, this author believes that the pioneer innovator is “legitimate” to obtain a part of the “social surplus” of innovation generated by the progress made thereafter. The solution remains efficient even if the costs generated exceed the intrinsic value. This distribution of surplus is, for Chang, both the “just reward” for the efforts of the pioneer but also a determining factor to encourage the latter to develop his innovation and distribute licenses. If these arguments seem to be strong from a theoretical point of view, they do not take into account the fact that innovation is a dynamic process resulting from what Bruno Deffains calls “the existence of a competitive structure at different stages of innovation development “. To put it simply, the pioneer innovator is not always in the best position to develop his invention, or does not necessarily have the technical skills. It is on this basis that the detractors of the pioneer’s exclusive right to exploit his innovation come into play. from the arguments presented in the article against exclusivity, such as the risk of “Hold-up”, the “licensing difficulties” or the “tax right” conferred on the patent holder, I would like to present three others that come to deepen or complete them. Robert P. Merges and Richard R. Nelson first put forward, in 1994, an argument based on “cumulative systems technologies”. According to them, these technologies have two particularities. The first is that they evolve in a sequential process away from the initial innovation. The second is that they consist of different elements that can be the subject of multiple applications. Thus, conferring an exclusive right to the pioneer on its innovation gives him the right to collect very significant profits on innovations introduced by competitors and sometimes far removed from its initial innovation. Therefore, if the pioneer has the exclusive right to exploit a component that has been patented, he is able to paralyze the entire industry by blocking the appearance of technologies on the market using this component. Secondly, our two authors explain that this exclusivity situation is perhaps even more problematic when it does not take into account how the product that is the subject of a patent has been manufactured. Competitors may use a patented process without using it under the same conditions. For example, if a company is granted an exclusive right of exploitation over all products using the same chemical process as the one he has just patented, then this patent absolutely prevents all competitors from using the basic principle of the process under completely different conditions. These first two arguments show us that a risk of market immobilism appears because each company tries to block others. Finally, Merges and Nelson pursue by uncovering a new “innovation brake” stemming from the exclusivity conferred on an innovation using a principle based on public scientific knowledge. When researchers publish a scientific discovery, companies fight to patent it first if an industrial application is possible. If Company A uses the new process to release a technical innovation and patent, then it has the power to prevent a company B to use the scientific breakthrough to innovate in turn. Company A can attack for counterfeiting all companies that use the same process by a phenomenon of “privatization of the use of public science”. To conclude, if we saw in this comment that there were arguments both for and against the exclusivity conferred on the pioneer, we can draw the conclusion that there is no regulation able to optimally incite all the actors at the same time, and that the incentives of one causes more or less disincentives for others. While the extended patent did not prevent the appearance of a wide variety of products on the market, it is, in my opinion, still an obstacle to innovation. The role of the legislator is thus to find “the optimal balance” between the incentives to innovate for pioneers and for next innovators. Sources : Deffains Bruno. Progrès scientifique et analyse économique des droits de propriété intellectuelle. In: Revue d’économie industrielle, vol. 79, 1er trimestre 1997. L’économie industrielle de la science. pp. 95-118. Santagata Walter. Propriété intellectuelle, biens culturels et connaissance non cumulative. In: Réseaux, volume 16, n°88-89, 1998. La propriété intellectuelle. pp. 65-75. Journal of Economic Literature vol. XXVII (September 1989) pp.1067-1097 Journal of Law and Economics, Vol. 20, No. 2 (Oct., 1977), pp. 265-290 Show less Reply Paul Belleflamme 17 February 2018 Very instructive comment! Paolantoni Nolane 13 February 2018 Competitive distortions are accentuated in so-called "cumulative inventions". Most new innovations today are based directly or indirectly on previous innovations. This is particularly true in the NTCI or biotechnology sectors. It is possible to discern two types of cumulative innovation. First, so-called sequential innovations correspond to the case where a series of second-generation innovations can only be developed from a "strain" innovation. Secondly,…Read moreCompetitive distortions are accentuated in so-called “cumulative inventions”. Most new innovations today are based directly or indirectly on previous innovations. This is particularly true in the NTCI or biotechnology sectors. It is possible to discern two types of cumulative innovation. First, so-called sequential innovations correspond to the case where a series of second-generation innovations can only be developed from a “strain” innovation. Secondly, the so-called complementary innovations are, conversely, the case where a second generation innovation requires the use of several “stem” innovations. However, perverse effects can be observed in the case of complementary innovations according to the mechanisms of the “anti-commons tragedy” (Heller and Eisenberg, 1998). This phenomenon illustrates the limits of Kitch’s theory (a broad patent makes it possible to point out to other companies the sectors already exploited by the pioneers and thus avoids waste) as a result of a confused encroachment of several broad patents on the same technology or the same product, thus multiplying the number of potential owners on all or part of the invention. For example, the biomedical sector is particularly affected by this tragedy of anti-commons. It is a sector in which basic research tends to be privatized, private firms specialize in pharmaceutical research. This privatization takes the form of Intellectual Property whereas previously fundamental research belonged to the public domain and accessible to all. The advantage is that this privatization has increased incentives to undertake risky research projects. But on the other hand, this privatization will create obstacles to future research, especially when too many people have rights to basic research. Otherwise, Shapiro talks about “Patent Thicket” to refer to this “dense network of overlapping intellectual property rights, through which a company must make its way to market a new technology.” This fragmentation of property rights makes the emergence of new innovations more difficult since the firm must multiply the steps to exploit the technical applications: it must first identify all the owners, negotiate with each one of them and pay as much license of use that there are owners. The task may be more difficult as it sometimes happens that the proprietors themselves do not agree on the extent of their respective patents. Also, the “multi-marginalization” resulting from this fragmented ownership increases the cost of each monopolist’s licenses. Transposed to the specific case of patents, studies and theories show that an innovator who needs several complementary innovations belonging to several companies will have to pay higher royalties than if they were held by a single firm. These additional costs can be so large that it is no longer profitable for the company to complete the project. This is obviously damaging for the innovator, but also for patentees who lose the opportunity to grow their licenses, and for consumers who can’t benefit from the technology. All of these strategies make the market of rights opaque and inevitably lead companies to attack, challenge or violate more and more titles. The “pro-patent” reforms have gradually led to a “judicialization” of economic relations that the media has described as a “patent war”. This unstable climate is leading to an increase in legal expenses to the detriment of R & D and favoring large firms to the detriment of SME-SMIs, which are less well endowed with legal and financial resources. In the United States, more than one billion dollars would be diverted each year in procedural costs. The case between Apple and Samsung caricature alone these drifts. In 2011, Apple filed a lawsuit against Samsung. One of the most important complaints made in the file is the design of the smartphone and Samsung icons that would be very similar to that of Apple. In addition to the fact that we can seriously question the social interest that there is a patent design of icons, we can especially wonder if the tens of millions of dollars in legal costs borne by the two companies would not have been more usefully spent on R & D. As a conclusion, it seems particularly important to recall that, from the point of view of the initial economic analysis, the patent is ultimately justified by the fact that it maximizes the collective good. Sources : – Livre : Le droit de la propriété intellectuelle dans une économie globalisée. – http://www.ipdigit.eu/2014/10/a-primer-on-cumulative-innovations/ – ftp://ftp.cemfi.es/wp/07/0701.pdf – http://www.beta-umr7522.fr/IMG/UserFiles/Penin/CFP%20MI%202006.pdf – https://inra-dam-front-resources-cdn.brainsonic.com/ressources/afile/279757-53f8c-resource-diaporama-fabienne-orsi-seminaire-bien-commun-fevrier-2015.html – https://www.memoireonline.com/12/07/736/m_patent-pool-transfert-biotechnologies-cellules-souches2.html Show less Reply Mahazomana Herivola Dominique 20 October 2017 Les droits de brevet constituent une motivation pour les entreprises qui investissent en R&D car elle permet à l'innovateur de jouir exclusivement de son innovation et donc de bénéficié des retombées économiques du à ce dernier. Si les droits de brevet peuvent est une motivation pour les entreprises qui investissent dans la R&D, elle n'en ai pas moins une entrave…Read moreLes droits de brevet constituent une motivation pour les entreprises qui investissent en R&D car elle permet à l’innovateur de jouir exclusivement de son innovation et donc de bénéficié des retombées économiques du à ce dernier. Si les droits de brevet peuvent est une motivation pour les entreprises qui investissent dans la R&D, elle n’en ai pas moins une entrave à l’innovation, en effet si elle donne un droit d’exclusion sur l’innovation en question, elle lui permet aussi de taxer tout autres souhaitant l’utiliser. À la stratégie d’accrochage et la difficultés de licences s’ajoute la tragédie des anticommons qui est le principal facteur ayant incité de nombreux chercheurs tels que Heller et Eisenberg à dire que les brevets limitent l’accès, et donc l’utilisation, de ressources communes. Quelle est la réel influence des droits de brevet cumulatif sur l’innovation ? Une recherche mené par Galasso et Schankerman ont soulevé 3 types de problème empirique: Premièrement, il faut identifier des technologies comparables avec et sans protection par brevet. La deuxième difficulté empirique est que les innovations ultérieures sont difficiles à identifier. Le dernier défi majeur est endogénéité: les facteurs qui rendent les brevets invalides diffèrent de ceux qui sont confirmés peuvent également affecter les citations de brevet. Autres exemple empirique : Le château de Pfalz, au Moyen Age, il est devenu impossible de faire du commerce sur le Rhin à cause des péages construits par toutes sortes de barons. (Instauration d’une barrière à l’entrée) Recherche de Augustin Cournot a expliqué en 1838 que le prix du laiton chuterait si un producteur de zinc monopoliste et un producteur de cuivre monopoliste pouvaient fusionner.(cela doit être régit par le droit de la concurrence pour que le consommateur final ne soit pas lésé). Anecdote du 20ème siècles en Amérique du nord. Dans la deuxième décennie du XXe siècle, il était presque impossible de construire un avion aux États-Unis. (pour construire un avion il faut d’innombrable innovation de première génération qui ont été breveté, or cela aboutit à ce que l’innovation de deuxième génération (l’avion) ai un coût trop élevé à la production du aux taxes que doivent payer les fabricants d’avion pour toute les innovations précédentes qu’il doit utiliser). Les cinéastes doivent souvent apporter des changements importants à leur travail en raison des coûts ou des complications liés à l’obtention des droits. En examinant comment l’invalidation d’un brevet affecte le taux de citations subséquentes à ce brevet il est possible d’estimer l’impacte des droits de brevet sur l’innovation. Il a donc été démontrer que la suppression de la protection par des brevet entraîne une hausse de 50% de l’utilisation des parties communes (cela renforce l’idée que le brevet empêche l’innovation). Il apparaît clairement en ces termes que même si le brevet sécurise l’innovation, elle est avantageuse que pour l’entreprise qui a innové. Pour l’innovation en général, c’est un obstacle (frein) à l’innovation, car la partie commune qui est la base de recherche pour toute entreprises voulant innové est trop peu exploité. La solution ne résiderais t-elle donc pas dans une réforme générale concernant les droit de brevets visant non pas à la supprimer mais à restreindre les droits de brevets pour leurs détenteurs (ex : taxes ou durée légal d’un brevet) ? Source : http://www.ipdigit.eu/2010/11/an-uncommon-riddle/ Show less Reply Chachki 11 February 2017 Anticommons are a paradoxe, while ownership increases wealth, over-patenting and too much ownership has the opposit effect. Buchanan and Yoon talked about "how and why potential economic value may disappear into the ‘black hole’ of resource underutilization" which is a nice way to introduce the subject. I like the idea of a black hole, because when you think about it,…Read moreAnticommons are a paradoxe, while ownership increases wealth, over-patenting and too much ownership has the opposit effect. Buchanan and Yoon talked about “how and why potential economic value may disappear into the ‘black hole’ of resource underutilization” which is a nice way to introduce the subject. I like the idea of a black hole, because when you think about it, that’s pretty much what it is. Patenting itself is great, it gives credit to the creator, but I think there should be a limit to what we see as a creation. Not every improvement should be patented, only the original idea in the field should be. Otherwise the excessive layers of patents are doing nothing but slowing down the innovation process. The over-use of patents is an obstruction competitiveness, excluding those who wish to enter the market. It’s also an obstruction to creativity. And I believe that creativity leads to even more creativity, technology would have been taken to a whole different level if patent holders were not that keen on constantly claiming what is theirs. The whole idea of patent ownership should be reevaluated. Is every improvement an innovation ? Is every improvement worth a patent ? If this was the case patents wouldn’t be more often than not invalidated source : http://wealthofthecommons.org/essay/tragedy-anticommons Show less Reply Paul Belleflamme 11 February 2017 You write: “Not every improvement should be patented, only the original idea in the field should be.” I can see your point but my question is: who will evaluate the difference between an original idea and a mere improvement, and according to which criteria? Laura Martin 10 February 2017 We have two different types of cumulative innovation. First there are, what we call complementary innovations. These are the generation products, which are based on a mixture of the components from several early generation innovations (from multiple innovations to one) For the other category we use the term sequential innovation. This means that we have first-generation products, which lead to second-generation…Read moreWe have two different types of cumulative innovation. First there are, what we call complementary innovations. These are the generation products, which are based on a mixture of the components from several early generation innovations (from multiple innovations to one) For the other category we use the term sequential innovation. This means that we have first-generation products, which lead to second-generation innovations. If the first one doesn’t exist the second could not exit. The question if patent rights facilitate or impede cumulative innovation is in a direct relation with the breadth of the patent. Patens are likely to block cumulative innovation as shown by several studies. When the breath of the patent is too expanded the second-generation innovations will possibly not take place, because the costs are too high for the innovators. But contrarily, if the protection isn’t sufficient the number of first-generation will probably decrease, which may decelerate economic growth. We have three different solutions to face this problem: -In the first case the breadth isn’t a problem because the first and the second-generation’s innovator is the same. – Another solution is to regulate the market of licences, which the innovator sells on his patent. The patent system could create a system for the licence market and put its hand on the price. -And at least we have the solution to give up totally (or in several domains). This would induce that every innovator could profit from the research of the others. But all the innovators would be forced to share their information. http://www.ipdigit.eu/2014/10/a-primer-on-cumulative-innovations/ Show less Reply Paul Belleflamme 11 February 2017 Very good summary of the problem. I wish you could dig a bit deeper, though. messad 10 February 2017 Patents are obtained through a process whose purpose is to prove the novelty as well as the commercial utility of the idea; In addition, it creates a tension between the innovators of the first and second generations so that the innovators of second generation impregnate the first generation to create innovations. When a company tries to launch a new innovation it…Read morePatents are obtained through a process whose purpose is to prove the novelty as well as the commercial utility of the idea; In addition, it creates a tension between the innovators of the first and second generations so that the innovators of second generation impregnate the first generation to create innovations. When a company tries to launch a new innovation it must be very careful because the latter can not be used without the required license; Often new innovations are patented innovations disclosed to the public. The debate between pro and anti patents on certain areas has long seen political, lawyers, and businessmen confront each other. In my opinion, there are positive effects, which are acknowledged from some of my research, the best known being the incentive to innovate created by the patent, this protection allows to ensure an economic return and investments linked to the ” innovation. source: The world newspaper. https://hal.archives-ouvertes.fr http://www.reuters.com/article/us-usa-court-iphone-idUSKBN13V1XL https://www.contrepoints.org Show less Reply LARCHER Julie 8 February 2017 We have seen several factors hindering the patent system, in this comment we will discuss a new element : cummulative innovation For the economist Michael Heller, the tragedy of anti-commons is a phenomenon where rational economic agents waste a certain ressource by underutilizing it. This occurs when individuals have an exclusinve right over a ressource, but the cost of using that…Read moreWe have seen several factors hindering the patent system, in this comment we will discuss a new element : cummulative innovation For the economist Michael Heller, the tragedy of anti-commons is a phenomenon where rational economic agents waste a certain ressource by underutilizing it. This occurs when individuals have an exclusinve right over a ressource, but the cost of using that ressource in a collaborative way is not worth the benefits. This is the oppositve principle of the tragedy of the commons. This therory applies in particular to the patent system. “The canonical story of the lone genius inventor is largely a myth.” (Lemley, 2011). Indeed, innovations build on previous inventions and separate inventons have to be combined to create value. A second-generation product requires the input of a number of different first-generation innovations. However, the right of exclusiveness granted to patents allows its owner to exclude competitors from the use of the invention but also to exclude the innovators from the second stage. Providing particulary restrivtive patents to early generations of inventors may reduce incentives to innovate in subsequent generations of inventors. So the larger the rights granted to one innovator, the lower the incentives for the other one… an innovator might be reluctant to invest in R&D if the exploits of the result depends on a third party owning an anterior patent. Moreover, the practice of « patent maquis » further complicates market access for the new entrants. The latter will have to pay additional user fees and multiply negociations to use the tatented technology, especially if patents are awned by different owners. Prices are higher if they are set by independent patentees rather than jointly (‘royalty-stacking). However, these effects vary according to the sector, and it especially the sector with complex technology that heavily rely on cumulative innovations and are the most affected : e.g., biotech, IT, telecoms, electronics and software) But, earlier innovators should be compensated for their contributions by being granted some right onsubsequent innovations. If all subsequent innovations were considered as infringements, later innovators would have no incentive to invest So the problem is : how to reward the original innovator, without excluding others from benefiting from the patented invention ? Mosner propose solutions to the problems raised by patents. Patent pools allow competing companies to combine their patents, wich helps defuse disputes that may arise when several companies hold patents for the same technology. The compulsory licence is a second alternative mechanism studied bu Mosner. It allows competitors to use or produce a patented invention, albeit by remunerating patent holders, but without having to obtain their consent. Not only ca&n more companies then use and produce the technology, but the intensification of competition is likely to generate more efficient versions of the technology, and the innovation process is encouraged. Gallini and Scotchmer (2002) propose également une solution : Broad patents can serve the public interest by preventing duplication of R&D costs, facilitating the development of second-generation products, and protecting early innovators who lay the foundation for later innovators. The benefits of broad patents disappear if licensing fails; more precisely, the optimal design of the patent system for cumulative innovations hinges on the ease with which rights holders can contract among them and find a way to solve the conflicts in rights. http://www.nber.org/papers/w20269 MOSER, Petra (2012), « Patent laws and innovation: Evidence from economic history », NBER Working Paper, n° 18631, décembre. Diapositives. LLSMS2041_07_2015_design.pdf Show less Reply Florent RUGI 6 February 2017 The tragedy of the anti commons, which is the “mirror image” of the tragedy of the commons, can be seen as an inefficient situation where owners have rights to exclude others (through, e.g. patents). In a world with no transaction costs, people could easily trade their rights. But this is a fictional world. Are patents an incentive to cumulative innovations?…Read moreThe tragedy of the anti commons, which is the “mirror image” of the tragedy of the commons, can be seen as an inefficient situation where owners have rights to exclude others (through, e.g. patents). In a world with no transaction costs, people could easily trade their rights. But this is a fictional world. Are patents an incentive to cumulative innovations? Does the tragedy of anti commons also affect multi-layer innovations? In the Galasso and Schankerman article “Do patent rights impede follow-on innovation?”, results explain that property rights impede cumulative innovation (due to the invalidation risk), so they conclude that a system without patent should facilitate innovations. I don’t really agree, because a system without patent would benefit only to the last to innovate, so it would lead to two things: first, cumulative innovations would grow in a ridicule way, on and on, so other “basic” but essential innovations would tend to disappear; then, one who innovates who is also not sure to earn financial benefits in order to recover his costs wouldn’t innovate. Another way to prove it is to read “Are the Nordic countries really less innovative than the US?”, where authors explain that, even with higher taxes on innovations, Nordic countries still have a very high amount of innovations. So, it proves that a system with protective property rights, which leads to higher R&D costs for cumulative innovations due to licensing prices, can still innovate in a serious way. Coase established that, in order to counter the tragedy of the commons, users may pay each other in other to not over use the resource. Symmetrical problem, symmetrical solution? If that’s right, it means that in order to avoid the tragedy of the ant commons, users shouldn’t pay anything. It seems rights, because if the fact that patents owners over use their rights and this results to impede innovations, the only way to promote innovation again is to eliminate all those costs. But is it a fair solution? Not really. Here, it is a system where patents no longer exist, so no one will innovate, etc … The main problem is that, about biomedical research for example, this tragedy leads innovations to be more and more complicated, and may also lead to a decrease in innovations. Biomedical research is very useful for society, and if one sector has to be saved, it is clearly this one. Regulation entities should go in a way, which, for instance, forbid a too big licences stacking, which may not be that difficult to implement. However, we will encounter difficulties for ever, we have to ask ourselves the right questions: Can not these difficulties be overtaken? Isn’t worth it? http://voxeu.org/article/do-patent-rights-impede-follow-innovation COASE, R. (1960) THE PROBLEM OF SOCIAL COST http://home.cerge-ei.cz/ortmann/UpcesCourse/Coase%20-%20The%20problem%20of%20Social%20Cost.pdf http://voxeu.org/article/nordic-innovation-cuddly-capitalism-really-less-innovative SIMONGIOVANNI, M. (2015) ÉCONOMIE DE LA PROPRIÉTÉ INTELLECTUELLE Cours licence 3 AES http://science.sciencemag.org/content/280/5364/698.full Show less Reply Bozhichkov Ruslan 7 December 2016 Nowadays innovation is of a crucial importance for the businesses and competitiveness of the firms. In order to innovate firms stand on the knowledge that has been accumulated through time. Patents are the main tool that helps for boosting innovation by the incentives it gives to the patent holder and the exclusive right to use the new innovation but it…Read moreNowadays innovation is of a crucial importance for the businesses and competitiveness of the firms. In order to innovate firms stand on the knowledge that has been accumulated through time. Patents are the main tool that helps for boosting innovation by the incentives it gives to the patent holder and the exclusive right to use the new innovation but it can also be a drag to further innovation because of this excludability right it gives. How can firms benefit from the knowledge produced by others without infringing their patent right in order to develop follow on innovation ? This problem can be dealt in the cases where follow on innovation contributes for the demand of the innovation the new one is based on. In this manner firm having the right to exclude other firms from using their innovation are given incentives not to do it because they benefit from this subsequent innovation. https://www.researchgate.net/publication/228172226_Cumulative_Innovation_in_Patent_Law_Making_Sense_of_Incentives Show less Reply Hadrien Simar 7 December 2016 “Do patent rights facilitate or impede cumulative innovation?” It seems that the hardening of the patent right is causing perverse effects on innovation. More and more innovations are based on older innovations that were patented. This results in the firms having to pay considerable amounts of money on patent rights in order to commercialize their new technology. This could lead to…Read more“Do patent rights facilitate or impede cumulative innovation?” It seems that the hardening of the patent right is causing perverse effects on innovation. More and more innovations are based on older innovations that were patented. This results in the firms having to pay considerable amounts of money on patent rights in order to commercialize their new technology. This could lead to a situation where companies would rather choose common knowledge over innovation because the development of new technologies, increasingly based on older ones, is too costly. This phenomenon is called the “tragedy of the anticommons”. Separate licensing would also result in higher prices paid by consumers as each firm would then need to acquire rights on older technologies. Because most firms are multiproduct producers, they could be tempted to increase not only the price of the patented product, but also the price of other products they manufacture to cover patent right costs. Cumulative innovation generates legal issues for firms but remains instrumental to improve products since it enables the combination of fractions of technologies together. It is therefore the duty of authorities to facilitate access to innovation for companies by softening patent policies. Otherwise consumers would end up harmed by a decrease in product differentiation combined with an increase of prices. Show less Reply Juan Presmanes Tejada 7 December 2016 The goal of this comment is to discuss the impact of patents and intellectual property rights in cumulative innovation. Are they useful to incentivate cumulative innovation? Fromm y point of view, competition in patent system creates some problems which have the opposite effect and slow down technological progress and cumulative innovation. In order to explain this opinion, it is important to…Read moreThe goal of this comment is to discuss the impact of patents and intellectual property rights in cumulative innovation. Are they useful to incentivate cumulative innovation? Fromm y point of view, competition in patent system creates some problems which have the opposite effect and slow down technological progress and cumulative innovation. In order to explain this opinion, it is important to start by refering to the tragedy of anticommons; in other words, a situation in which many owners have the right to prevent others from using a common resource, but they don’t have the exclusive right to use it, so those resources are not efficiently exploited as it would be desirable. This is something that might happen in the field of innovation and intellectual property rights, as many times patents holders forbid others to use one resource and avoid or complicate them to carry out an innovation process. Although the patent system is supposed to help and protect innovators, this may not take place when patents’ length and breadth are disproportionately designed. If innovators find difficulties to access to valuable resources which could boost innovation, the production of new and better products and services will be lower, worsening the consumers’ welfare. One clear example of the tragedy of anticommons is the biomedical industry. Currently, there are too many patents in this industry which raise R&D investments costs, causing a big harm for society. As a result, the prices of drugs in the US are higher than in Europe or Canada. In fact, there are firms that buy patents just expecting innovators exploit a technology and take them court, so they can get a profit. For example, recently the US Supreme Court ruled in favor of Samsung in his judicial battle with Apple, which demanded an indemnification for the alleged violation of a patent. The reason why the tragedy of the anticommons take place is that the property rights are badly defined, as they allow owners to excluse others from the explotation of one good, but they don’t give them the exclusive right of use. Therefore, useful resources for innovation and for the development of inventions are underexploited. In addition, according to Germán Coloma “this problem is due to the existence of market power, which causes an efficiency because of the creation of complementary monopolies over different aspects of the use of resource”. As a conclusion, i strongly believe that, in some cases, the proliferation of patents might become an obstacle to innovation, causing several problems for all of us. Thus, it is extremely important to define correctly the intellectual property rights in order to fight against what we call the tragedy of anticommons. http://www.reuters.com/article/us-usa-court-iphone-idUSKBN13V1XL http://www.ucema.edu.ar/u/gcoloma/comunes.pdf http://voxeu.org/article/do-patent-rights-impede-follow-innovation http://manzanamecanica.org/2006/04/la_tragedia_de_los_anticomunes.html Show less Reply Akalibu Guélord 7 December 2016 Firstly, the bottom of the issue is a little difficult to detect. And therefore, the very concern become more complex to define. In my point of view, the counterproductivity of the patent is as a fatality.All issues mainly start from the fact that it is been allowed to drag on innovation by enabling multiple right owners. Separate licensings are multiplied…Read moreFirstly, the bottom of the issue is a little difficult to detect. And therefore, the very concern become more complex to define. In my point of view, the counterproductivity of the patent is as a fatality.All issues mainly start from the fact that it is been allowed to drag on innovation by enabling multiple right owners. Separate licensings are multiplied and it is confusing to respect the prior art. Can we imagine that a “tragedy of anticommuns” make part of our evolution? I don’t think so.. Maybe we are causing the negative side of the innovator’s mentality by allowing all this “exclusive right” field. In fact, I basically agree with fact that cumulative innovation be patended but if we don’t limit patent rights in cumulative innovation, we make difficult to detect invalid patent and find the first innovator. Therefore, the second innovator can create his exclusive rights from the innovation of the first creator. We have to be careful and create a balance between giving patent to cumulative innovation and limiting exclusive rights in patent. Show less Reply cadenoel 7 December 2016 On the one side, I want to present theoretical arguments about the effect of patent rights on cumulative innovations. Firstly, Kitch in 1977 argues that patent rights can facilitate cumulative innovation by considering the upstream innovator as the gatekeeper to coordinate downstream investments (Schankerman, 2016). What's the concept of gatekeeper? It's the fact that "patents enable an upstream inventor…Read moreOn the one side, I want to present theoretical arguments about the effect of patent rights on cumulative innovations. Firstly, Kitch in 1977 argues that patent rights can facilitate cumulative innovation by considering the upstream innovator as the gatekeeper to coordinate downstream investments (Schankerman, 2016). What’s the concept of gatekeeper? It’s the fact that “patents enable an upstream inventor to coordinate investment in follow-on innovation more efficiently and to mitigate the dissipation of profit from downstream competition that can lead to underinvestment”(Schankerman, 2016). Secondly, Green and Scotchmer, in a paper in 1995, highlight the importance of the bargaining negociation in the influence of patent right on innovation. They show that as long as bargaining between the parties is efficient (no transformation costs and perfect information), upstream patent rights will not impede follow-on innovation that increases total value (joint profit) (Schankerman, 2016). Bargaining failures can arise from two main sources: asymmetric information about the value of the initial or follow-on innovation (Bessen and Maskin, 2009) and when downstream innovators need to license multiple (complementary) upstream patents that are held by distinct patent holders.Schankerman, 2016) On the other side, they are plenty of examples of influence of patent rights on cumulative innovation. First, M.Helles et R. Eisenberg (1998) in “Can Patents Deter Innovation? The Anticommons in Biomedical Research” bring to the fore the case of the biomedical world. “An anticommons in biomedical research may be more likely to endure than in other areas of intellectual property because of the high transaction costs of bargaining, heterogeneous interests among owners, and cognitive biases of researchers”. Second, survey have shown that, however they have the medical sector in common, cumulative innovation in pharmaceuticals and medical instruments react different in front of patent rights. Patents have no blocking effect in drugs, but do in medical instruments. Third, another example come from a survey done by Schankerman in 2016. He shows that patent rights have a significant and large effect in the fields which are complex and where patent ownership is more fragmented: patent invalidation raises citations by 203% in electronics and 178% in computers and communications. By contrast, with the chemicals and mechanical technology fields were the effect is much less important. Show less Reply Laureen de Barsy 27 April 2017 Hi, Thank you for this interesting post. I am particularly interested in the following: “Survey have shown that, however they have the medical sector in common, cumulative innovation in pharmaceuticals and medical instruments react different in front of patent rights.” I was wondering if you could tell me which surveys you are referring to. Thank you very much. Julien Loriers 7 December 2016 The influence of patents on future cumulative innovations is explored in this blog post based on an empirical examination. I will discuss through this comment how anticommons are and explore further arguments that support the influence of patents on cumulative innovations. Cumulative innovation is the application of different resources of knowledge for the implementation of a new innovations or the combination…Read moreThe influence of patents on future cumulative innovations is explored in this blog post based on an empirical examination. I will discuss through this comment how anticommons are and explore further arguments that support the influence of patents on cumulative innovations. Cumulative innovation is the application of different resources of knowledge for the implementation of a new innovations or the combination of separated inventions to create values. The protection of innovations by a patent offer rights to the patentee either to get revenue from the use of its innovation or to exclude other from using it. The blog post refers to the tragedy of anticommon to illustrate this real-life problem. The tragedy of anticommcon arise when many owners have a rights on a resource and none of them has the right of exclusion or when multiple entities have the right to exclude others from a resource and none of them has exclusivity on this resource. The metaphor name it a tragedy since the dispersion of properties throughout multiple players results in the difficulty of an emerging private property making the right usable. (May 1998, Michael A. Heller, Rebecca S. Eisenberg). Historically, this situation on IP has already slowed down inventions implementation. When the Wright brothers held patents an aircraft part and Glenn Curtis held patents on the ailerons. To discuss with today’s innovation challenge, let’s go over the process of an innovation. An innovation is often the pooling of multiple products or services, inventions or implementation of existing technologies. While in the past R&D for innovation represented significant costs for a firm, patents granted the innovator revenues in counterparty through licenses fees or other form of contracts from competitors who entered the industry. Innovation happened slowly and licenses often granted one the right to run businesses based on a patented technology if profits could surpass the fees. Today, the technological environment in many industries forces firms from all size to rely their business implementation on previous innovation to out-innovate competitors to survive in the markets. Times and money are for many a critical issue. Patenting is here a notable brake to innovation. Furthermore, entities named PAE (Patent Assertion Entities) aim to turn away the initial purpose of patents to create a real business on its weaknesses. This will only undermine the general interest and low the consumer surplus. We can ask ourselves the real utility of firms that ground their business model on activities that steal one’s profit rather than creating value for the society. When analyzing the tire industry, I have point out that patenting was much harder than in other industry due to the easiness of circling patented tire formulation. So when a firms wanted to collect characteristics from different producers to create a tire with numerous characteristics, they only had to spend budget on finding the appropriate parallel component that outdo the patent regulation. Firms have nowadays started not to patent anymore to keep their competitive advantage and stopped loosing in patent investment, which became immediately useless. “We don’t need toll road for innovation, we need faster highways” (March 2015, Vivek Wadhwa). This economical quote nicely concludes my opinions over the impact of patents rights for cumulative innovations. Bibliographie: – BUCHANAN, J.M. and J. YOON, Y. (2000) SYMMETRIC TRAGEDIES: COMMONS AND ANTICOMMONS*. Available at: https://www.law.upenn.edu/fac/pwagner/ideas/buchanan_yoon.pdf (Accessed: 7 December 2016). – Belleflamme, P. (2010) A primer on cumulative innovations. Available at: http://www.ipdigit.eu/2014/10/a-primer-on-cumulative-innovations/ (Accessed: 7 December 2016). – Wadhwa, V. (2015) Here’s why patents are innovation’s worst enemy. Available at: https://www.washingtonpost.com/news/innovations/wp/2015/03/11/heres-why-patents-are-innovations-worst-enemy/?utm_term=.d4e2719951a6 (Accessed: 7 December 2016). – Heller, M.A. and Eisenberg, R.S. (1998) ‘Can patents deter innovation? The Anticommons in biomedical research’, Review, 280(5364), pp. 698–701. doi: 10.1126/science.280.5364.698. – NAN, H. (2014) Tire design database to prevent patent disputes. Available at: http://ipr.chinadaily.com.cn/2014-10/15/content_18744054.htm (Accessed: 7 December 2016). Show less Reply Muller Matthieu 7 December 2016 Common anticommons? For Buchanan and Yoon (2000) “Anticommons is a useful metaphor for understanding how and why potential economic value may disappear into the “black hole” of resource underutilization”. They argue that an anticommons problem occurs when several entities have the right to exclude. Heller and Heisenberg (1998) present anticommons to explain why merchants bought kiosk on the street meanwhile buildings remain…Read moreCommon anticommons? For Buchanan and Yoon (2000) “Anticommons is a useful metaphor for understanding how and why potential economic value may disappear into the “black hole” of resource underutilization”. They argue that an anticommons problem occurs when several entities have the right to exclude. Heller and Heisenberg (1998) present anticommons to explain why merchants bought kiosk on the street meanwhile buildings remain empty in the 90’ in Moscow. More generally, housing permits are anticommons because they require the approval of several entities who all have the authority to prevent you to build. James Buchanan presents another example of anticommons. An entrepreneur wanted to invest in a seaside/hunting-preserve resort. His project was inhibited by the necessity of getting permits from several agencies. Even the environmental movement know the effect of interposing additional authorities with the right to exclude development of facilities. All these examples show the pervasiveness of anticommons in our economic interactions. Does this have an impact on cumulative innovations? Do patent rights facilitate or impede cumulative innovation? In the first instance, we defended that without patterns or copyright the intellectual works would not be produced. But, in the last decade, this rational has been strained. Indeed, we consider that the creator could appropriate other sources of profits with his intellectual work. The professor José Louis Ferreira tried to understand the various aspect of the problem. For him, patterns are balanced between efficiency and fairness. But knew complications are emerging with new technologies. Most of time, new inventions need the use of many previous development, each of them already patterned. The fragmentation of patent ownership and the asymmetric information on costs and benefits increases the costs of negotiation. This lead us to a patent system who is a handicap for innovation. Sampat and Williams (2015) have worked on this subject for some time. They have analyzed data on successful and unsuccessful patent applications in the gene sector. Based on this data, they made a simple comparison of follow-on innovation across genes claimed in successful versus unsuccessful patent applications. After that, they used the leniency of the patent as an instrumental variable for whether the patent application was granted a patent or not. They found out that patent had not quantitively important effect on follow-on innovation. To conclude, the patent rights have an impact on cumulative innovation. Anticommons affect negatively cumulative innovation, but otherwise we can not predict how the patent rights will affect the innovation. Bibliography: Buchanan, James, Yoon, Yong J.(1999). “Majoritarian Management of the Commons. Unpublished manuscript”. Heller, & Michael, A.(1998). “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets.” Harvard Law Review 111: 621-88. Ferreira, J. (2015). How patent rights affect cumulative innovation. Retrieved from http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/. Sampat, B., & Williams, L.(2015). How do patent affect follow on innovation? Evidence from the human genome. Retrieved from http://economics.mit.edu/files/9778. Show less Reply Alexia Borremans 7 December 2016 It seems clear that patent rights can, in many cases, become barriers for cumulative innovation. It is now necessary to determinate if the tragedy of the anticommons finds many applications nowadays or if it is subjected to particular circumstances. We also need to clarify all the effects that patent rights can have on cumulative innovation. One of the well-know illustrations of…Read moreIt seems clear that patent rights can, in many cases, become barriers for cumulative innovation. It is now necessary to determinate if the tragedy of the anticommons finds many applications nowadays or if it is subjected to particular circumstances. We also need to clarify all the effects that patent rights can have on cumulative innovation. One of the well-know illustrations of this tragedy is the historical story of Moscow after communism, where the streets were full of empty kiosks and shops. Because several agents were holding rights of exclusion over the use of the buildings, permits had been made extremely difficult to obtain and the buildings remained idle (Buchanan and Yoon (2000)). In the context of the 1980s, Heller and Rebecca (1998) also used anticommons to explain delays in applying research developments. At that time, patents were also protecting basic research findings, usually emerging from the laboratories of academic entities, in order to encourage investment in research. The problem was that, if a subsequent developer wanted to secure the value of his work, he could not do so because it was not available anymore since there was already a patent on it. Hence development was restrained because of patent protection, although its purpose was to foster investments. Another application of the anticommons tragedy discovered by Buchanan in 1999 was for the investment in a combined seaside and hunting-preserve resort, for which the action was inhibited because he had to gather too many permits from several regional agencies that were each holding exclusion rights to the project. The same pattern is observed for housing permits, which need the approval of multiple overlapping agencies that can all prevent construction (Buchanan and Yoon (2000)). From these examples, we can conclude that in general, overlapping bureaucracies tend to become an illustration of the tragedy of the anticommons. Even though it is hazardous to come to a conclusion concerning the frequency of occurrence of anticommons, they seem to appear more often than it could be expected. With regard to the effects of patent rights on cumulative innovation, it seems evident that the patent system can impede innovation. As it is said in the article, there is a possibility of underuse of resources (tragedy of the anticommons), which, according to Ferreira (2015), is even more likely to occur if the ownership of that resource is fragmented. This partition of ownership also complicates and slows down the process of colleting rights, because the innovator will have to overcome high transaction costs and negotiation costs related to strategic behaviors of patent’s holders. This can drastically reduce the incentives to develop innovation based on existing protected knowledge, as Heller and Eisenberg (1998) explained it. However, according to Ziedonis and Hall (2001), we can qualify these effects in the context of an industry with a high or a low pace of technology. Cumulative innovation does, by definition, rely on several previous discoveries, which can imply licenses and negotiation costs. In an environment with fast development of technologies, it is very likely that a great number of these patents will still be valid. Consequently, the innovator will notice a significant increase of the costs of innovation development. Biotechnologies, biomedical research, electronics and computers constitute the sectors that will usually benefit from patent invalidation, as it is already mentioned in the article. On the other hand, in an industry with a low pace of technology, new discoveries will not suffer as much from the effects of patent rights. Sources: Buchanan J. & Yoon Y. (2000), Symmetric Tragedies: Commons and Anticommons, Journal of Law and Economics, 43 (1), 1-13 Galasso A. & Schankerman M. (2013), Do patent rights impede follow-on innovation?, online http://voxeu.org/article/do-patent-rights-impede-follow-innovation Ferreira J. (2015), How patent rights affect cumulative innovation, online http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ Heller M. & Eisenberg R. (1998), Can Patents Deter Innovation? The Anticommons in Biomedical Research, online http://science.sciencemag.org/content/280/5364/698.full Ziedonis R. & Hall B. (2001), The Effects of Strengthening Patent Rights on Firms Engaged in Cumulative Innovation: Insights from the Semiconductor Industry, online http://eml.berkeley.edu/~bhhall/papers/HallZiedonis01%20libecap.pdf Show less Reply Antoine Van Der Haegen 7 December 2016 Throughout the years we have had to face a well-known phenomenon, the resources depletion due to the exhaustive use of common resources. However, besides the overuse of common resources, the underuse also forms a problem and is caused by the large number of patents. Could that be an indication that our current patent system is defective? The underuse of…Read moreThroughout the years we have had to face a well-known phenomenon, the resources depletion due to the exhaustive use of common resources. However, besides the overuse of common resources, the underuse also forms a problem and is caused by the large number of patents. Could that be an indication that our current patent system is defective? The underuse of resources, also known as “the tragedy of the anticommons”, is an issue that has become more obvious with the raise of new technological inventions that required previous patented developments. But, how has this problem emerged? When there are too many patent owners who exercise their right of exclusion, they inhibit the use of common resources. The high fragmentation of patent ownership is an obstacle for cumulative innovations because the innovators need to obtain various licenses which increase the costs of their new product. This often leads to the abandonment of the production plans for it. On the other hand, the high fragmentation is also a handicap for the patent holders. They lose their licensing fees because of it. The tragedy of the anticommons is something we need to correct to avoid the underuse and thus the waste of common resources that could be crucial in the development of a new product. This issue questions the validity of the whole patent system, because it provokes the opposite effect of the patent system’s initial objective, that is to create incentives to push innovation. The most common arguments used to point out the negative effects of the patent rights on cumulative innovations are the following. The first is the empirical study done by Galasso and Schankerman. In this study, they found out that the removal of patent protection increases the use of it in citations of subsequent innovations with 50%. The second argument is the fact that the increased number of patents resulted in holdup strategies. Finally, the last argument is the Myriad case where the Supreme Court decided to restrict the patent rights of the company, Myriad, to promote cumulative innovation in the genes sector. However, no generalisation of those negative effects has been proven through the analysis. We only know that the patent rights have a significant impact on cumulative innovation in fragmented and complex sectors, such as the IT sector, the software spaces and the biotechnology sector. Nevertheless, there are also counter-arguments such as a study on human genes where the effects of patent rights on subsequent innovation appeared to be very small. In my opinion, the solution to avoid any ambiguity about whether or not the current patent system affects cumulative innovations is to redefine, in a more precise way, the framework of the patent rights and to establish targeted regulations on patent rights for specific sectors. By doing so, it will enable innovators in complex sectors, such as the biomedical sector, to base their innovations on previous ones. In those sectors, it is more important to innovate than to respect the rights of the patent holders. Apart from that, I think that even if anticommons are a negative effect of the patent rights, when we look at all the advantages coming from them, it outweighs this little disadvantage. I agree the patent rights should not freeze cumulative innovations, but that could be easily rectified with designing policies, institutions that facilitate more efficient licensing and targeted regulations. To conclude, the anticommons issue is still very new and very difficult to identify. The worst we can do is to rush to hasty conclusions. We need to further analyse the problem and to find a mechanism that identifies the real impact of it on the different sectors before taking measures. http://www.newyorker.com/magazine/2008/08/11/the-permission-problem https://ideas.repec.org/p/wdi/papers/1997-40.html http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ http://wealthofthecommons.org/essay/tragedy-anticommons http://economics.mit.edu/files/9778 http://www.digitopoly.org/2014/07/17/do-patents-stifle-cumulative-innovation/ http://www.wpz-fgn.com/wp-content/uploads/1460556705_SZ6itWqcy9jo.pdf Show less Reply Laura Maldague 7 December 2016 In the current economic environment, it clearly appears that property rights are a drag on innovation. As a matter of fact, almost every new product requires the combination of previously patented knowledges. Trying to deal with each previous patent, new inventors of the second generation are losing time and huge amount of money in royalties. This results in an increase…Read moreIn the current economic environment, it clearly appears that property rights are a drag on innovation. As a matter of fact, almost every new product requires the combination of previously patented knowledges. Trying to deal with each previous patent, new inventors of the second generation are losing time and huge amount of money in royalties. This results in an increase in total price and a loss of incentive to innovate. This whole issue is more commonly called the tragedy of anticommons. This illustrates rightly the fact that the access to a product can be reduced due to some exclusion rights. Patent system has then to face a consequent challenge: rewarding first-generation inventors or make sure the second generation can fully benefit from the previous innovation. According to me, an argument regarding the effects that patent rights have on cumulative environment can be the measure of the waste in R&D. By that, I mean that the amount of time and money wasted in successful researches (i.e. researches resulting in a marketable innovation that cannot be sold because of previous patents) could be a significant indicator. Comparison can be made with innovations that came up to the market “without any” trouble. Money and time are, according to me, clear side effects’ evidences of patents on cumulative innovation. Finally, searching for some sharp arguments, it appeared that finding prove of patent rights’ side effects is compromised by the myriad of existing patents. As mentioned in the article “Do patent rights facilitate or impede cumulative innovation?”, results will even show variations according to the sectors. Show less Reply Anish Singhal 7 December 2016 I agree with the article that royalties may prevent new innovators from utilising the existing ideas which have already been patented. However, according to me this becomes an opportunity to unleash one’s creative potential in the industry which is essentially the idea behind protecting IP rights as well. Take the audio-visual technology developments in the entertainment industry. If every new…Read moreI agree with the article that royalties may prevent new innovators from utilising the existing ideas which have already been patented. However, according to me this becomes an opportunity to unleash one’s creative potential in the industry which is essentially the idea behind protecting IP rights as well. Take the audio-visual technology developments in the entertainment industry. If every new innovator decides to utilize the existing patents without any royalty then they will be tempted to carry out incremental innovations only. Another reason for this would be lack of reward at the end of the innovation (since every subsequent innovation will not be allowed to charge a royalty fee). Mark Zuckerberg would never have invented real time touch sensing videos had he decided to invest in incremental changes only. Thus, if royalty fee is a deterrent, avoiding it is also an incentive to innovate out of the box. Overall, such creativity would benefit the industry at large. Assuming, it becomes indispensable to utilise an existing patent and a new player is forced to pay the royalties, then I suggest the following method to incorporate fairness in the system: If a party utilises an existing patent during its research, it must gladly pay the licensing fee. Later, if it is able to achieve a patent of its own then it must be allowed to prove the utility of the prior patent in retrospect. The court of law may allow partial refund of the licensing fee if there is merit in the new innovator’s claim about the utility of the old patent. This will eliminate the stacking effect, and hence lead to lesser overall costs of the new product/ idea. Consequently some benefit will pass on to the customer as the innovators at each step could save costs. Show less Reply Juhi Kapoor 7 December 2016 Although the article inches in the favour of the thought that royalty stacking does hinder cumulative innovation, I would like to present a different view through the following points: 1. As we understand the world of patenting, patents are achieved through an exhaustive process of proving the novelty as well as commercial utility of one’s idea. Naturally, a lot of close…Read moreAlthough the article inches in the favour of the thought that royalty stacking does hinder cumulative innovation, I would like to present a different view through the following points: 1. As we understand the world of patenting, patents are achieved through an exhaustive process of proving the novelty as well as commercial utility of one’s idea. Naturally, a lot of close ideas with ‘slight differences’ get left out in the race for acquiring patents and come to fall under the ‘patent invalidation’ category. If a new innovator steps into an industry with the intention of a complementary or subsequent innovation (such that he/ she needs to utilize the existing research), then he/ she may incur huge information search costs while he tries to identify the most useful piece of research. If certain pieces of work already fall in the ‘patented’ category, then it significantly reduces the search costs and directs him to the right information. Therefore, the true comparison must be between the cost of licensing/ using a patent versus the search cost incurred in finding the right piece of information. 2. Most industries like electronics, e-commerce, pharmaceutical etc have had breakthrough innovations in the past. It is safe to assume that most innovations draw insights from the existing research in the industry. However, the idea of breakthrough innovation is associated with a lack of precedence or anticipation. Therefore, if one doesn’t anticipate a subsequent innovation, how can one deny patenting rights to the current innovator? The point I’m making is that each patent holder must be rewarded for his/ her innovation in order to maintain motivation in the industry. Also, this helps maintain an appropriate patent environment. The above points help me negate the outright argument against having multiple patents. These points make a reasonable case for royalty stacking in any industry so as to achieve a healthy, competitive innovation environment. Show less Reply Haux Mélanie 7 December 2016 In my point of view, I think that patent rights can do both (facilitate and impede cumulative innovation). Let me explain, as it is mentioned in the article “A primer on cumulative innovations” from Paul Belleflamme, it exists two types of cumulative innovation: (1) “one to many” which are sequential innovations and (2)“many to one” which are complementary innovation. …Read moreIn my point of view, I think that patent rights can do both (facilitate and impede cumulative innovation). Let me explain, as it is mentioned in the article “A primer on cumulative innovations” from Paul Belleflamme, it exists two types of cumulative innovation: (1) “one to many” which are sequential innovations and (2)“many to one” which are complementary innovation. Those two types of cumulative innovations combine with patents’ issues, can lead to two different problems which are ‘hold-up’ for sequential innovations and ‘tragedy of Anticommons’ for complementary innovations. In this view, patent rights can be seen as a brake for cumulative innovation because companies doing those types of innovations might not have the means to struggle those issues. Because if you are a small company, you will have less equipment to fight against those problems than if you are a bigger one. Taking the case of those smaller firms, they would have less capital to invest for paying the licenses that give them the right to use the previous innovations. Moreover, the more patents they will have, the more they will have to pay to negotiate which make them less able to find new innovations and that give them less motivation to innovate. I think that a good solution for that will be to use the patent pools but those are difficult to form and to implement. However, the patent rights opportunity can be seen as an incentive to motivate firms to innovate because the more the firm will have patents, the more independent the firm will be because the company would not have to negotiate the transaction cost to gain licensees considering the fact that they will have their own. In that view, I believe that it will give them more incentives to find cumulative innovation. To conclude, for me the debate on patent rights is not yet finished, I think that every firms or individuals should make a kind of list of which are the pros and the cons to file a patent and to decide whether it is better for them to use their own patent or to pay for licensee. References 1. Belleflamme, P. (2016). Sequential innovations (slides). Not published, Louvain School of Management, Louvain-la-Neuve. 2. Belleflamme,P.(2014). A primer on cumulative innovations. IPdigit 3. http://avocats-publishing.com/LES-PATENT-POOLS Show less Reply Reeskamp Adriaan 6 December 2016 Do patent rights facilitate or impede cumulative innovation? I will like to share my opinion on this interesting subject. It is certain that cumulative innovation is central to economic growth. The majority of today’s technologies were created thanks to these cumulative innovations. A distinction between sequential and complementary innovations should be made. The first innovation refers to the fact that a…Read moreDo patent rights facilitate or impede cumulative innovation? I will like to share my opinion on this interesting subject. It is certain that cumulative innovation is central to economic growth. The majority of today’s technologies were created thanks to these cumulative innovations. A distinction between sequential and complementary innovations should be made. The first innovation refers to the fact that a specific innovation leads second generation innovations. Complementary innovations, on the other hand, refers to second generation innovations that requires the input of different first generations innovations. Most of today’s new technologies are complementary innovations mixing several first generation technologies. One thing is sure, innovation is a good thing because it fosters growth. Patent are created to protect intellectual works and innovation with the idea that without them intellectual work would not be produced. So if there were no negotiation costs, there would be no problem with using previous developments in new inventions. But this is not the case, due to the fragmentation of patent ownership, the cost of negotiation increases. Knowing this, we could ask ourselves if the affirmation I made earlier still holds or on the contrary, could we say that the patent system is a handicap for innovation. For instance, let’s picture a company wanting to create a cumulative innovation. The patent holders of the previous innovations have the right to claim against the subsequent innovator. So the firm wanting to create the cumulative innovation will anticipate the expected costs of such claims and could decide to not invest in this innovation, which could potentially be a good invention for the society, due to the high costs. This would be very bad for the economy and for economic growth. Even if the firm would decide to produce this second stage innovation, it would result in higher costs and it would be, at the end, bearded by consumers. To see if patent protection has really a negative impact on cumulative innovations a study has been made on the subject. The conclusion of the study stated the following: “Overall, our findings show that patent rights block cumulative innovation only in very specific environment”. Indeed, the impact of patent invalidation on subsequent innovations is heterogeneous. The results are different depending on the sector. The study show that patent invalidation has a large impact on cumulative innovations in the following fields: computers and communications, electronics and medical instruments. On the other hand, the study results show that patent invalidation has a very small impact on chemical, pharmaceutical and mechanical technology fields. References: World Economic Forum. (2015). Do patents stifle innovation? Retrieved December 6, 2016 on https://www.weforum.org/agenda/2015/01/do-patents-stifle-innovation/ Mappingignorance. (2015). How patent rights affect cumulative innovation. Retrieved on December 6, 2016 on http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ Vox. (2013). Do patent rights impede follow-on innovations? Retrieved on December 6, on http://voxeu.org/article/do-patent-rights-impede-follow-innovation IPdigIT (2014). Do patent rights facilitate or impede cumulative innovations? Retrieved on December 6, on http://www.ipdigit.eu/2014/11/do-patent-rights-facilitate-or-impede-cumulative-innovation/ Show less Reply Nico Hofmann 1 December 2016 I want to contribute to this article by taking a theoretical approach on how patent rights influence cumulative innovations. To find out what impact patents have on cumulative innovations it is necessary to have a look at the change of expected costs and expected profit between having and not having patents. If expected costs and expected profit don’t change, then patents…Read moreI want to contribute to this article by taking a theoretical approach on how patent rights influence cumulative innovations. To find out what impact patents have on cumulative innovations it is necessary to have a look at the change of expected costs and expected profit between having and not having patents. If expected costs and expected profit don’t change, then patents would have no to little impact on cumulative innovations. However, if expected costs and expected profit change, which is closer to reality, patents have an impact on the incentives of innovators. I’m going to discuss the impact of patents on cumulative innovations by differentiating between drastic and non-drastic innovations: If the innovator expects his new innovation to be a drastic innovation he knows that by having sufficient low production costs with a high chance he can charge a monopoly price. This means he is very likely to make a profit even when paying fees to the owners of patents he used for his innovation. Patents for cumulative innovations in this area should have no negative effect on the incentive to innovate. On the other hand, if the possible new innovation is expected to be no-drastic patenting has an effect on cumulative innovations. For this case, I separated innovations in two groups: innovations in fast developing industries and patents in slow developing industries. To be able to compare small and fast developing industries I do both analyses inside a timeframe with an equal length of 1. Starting with cumulative innovations in slow developing industries, one can see that because of a slow development in the innovation flow sheet many “parent patents” in the considered timeframe are already expired. This leads to a small amount of active “parent patents” and therefore, to expected low costs for the innovator in comparison with innovations in fast developing industries. In my opinion, this expected cost doesn’t have a huge influence on the expected profit; hence the effect on the incentive to innovate is a slightly negative one. To explain the higher costs in fast developing industries I’m looking, as in the previous paragraph, at the amount of granted patents inside this timeframe with the length 1. Because of fast development, the amount of innovations produced in this timeframe is huge, which for a new innovator means that there are many “parent patents” in the innovation flow sheet that are still valid. This implies that by having a great number of valid patents the expected costs also will be high. This in combination of a non-drastic innovation leads to situation where the innovator doesn’t know if the expected outcome will be a positive or negative. I think this will have a negative influence on the incentive to innovate. But, and this is a big one, patents can under certain assumptions have a positive influence on inventing. As mentioned before, in a fast developing industry there are many innovations made in a small time frame, therefore an innovator can think that there will be new inventions using his innovation after he got his invention patented. If he expects these future inventions to be made, patented and produced within the duration of his patent and assuming that the new inventors have to pay him fees which cover his innovation costs he is more likely to innovate even in a non-drastic, fast developing industry. To conclude, I arrive to the finding that the effect of patents on cumulative innovations differs from sector to sector. This is similar to the finding made by Galasso and Schankerman (2013), however, my finding indicate that patents can accelerate the amount of innovations made in fast developing industries, in “sectors with complex technology”. This would mean that an abolition of patents wouldn’t increase but decrease the incentives to innovate. Show less Reply Lachapelle Nathan 1 December 2016 Do patent rights facilitate or impede cumulative innovation? I would like to share my thoughts on this topic. Then I will try to find other arguments regarding the effects that patent rights have on cumulative innovations. First of all I think there is a tradeoff to deal with when we ask the question "do patent rights facilitate or impede cumulative innovation?".…Read moreDo patent rights facilitate or impede cumulative innovation? I would like to share my thoughts on this topic. Then I will try to find other arguments regarding the effects that patent rights have on cumulative innovations. First of all I think there is a tradeoff to deal with when we ask the question “do patent rights facilitate or impede cumulative innovation?”. First we can say that it might facilitate innovation because once the patent application is launched, all the information will be available for competitors, and they can build up from that information. Had the patent being kept secret this would not have been the case. But then comes the question: do innovation patents impede? If they can restrain others from making innovations because it infringes the patent, then maybe yes. There is, however, uncertainty about whether it would infringe and whether the patent holder of the “bottom” innovation would actually sue the others. But then, the innovation has already been made a the new information is now known, and thus it somehow does not impede it, but simply disincentives the others to publish their innovations based on the first innovation. So here I argue that the uncertainty might favour innovation in the sense that if you were sure that you would be sued you would not have invested but now with uncertainty you can still hope for leeway and thus the outcome is better than in the presence of perfect information about other firms’ patents. However empirical works have shown that patent rights and the tragedy of the anticommons are real. The tragedy of the anticommons refers to a situation where “There are multiple rights of exclusion or veto rights. Those who hold the rights of exclusion effectively undermine the right to use the resource, especially when exclusion rights and use rights are not necessarily bundled for all rights holders. The effect is an under-use of the resource” (Bresten & Hill, 2009). There are numerous examples where it is true as in the biomedical sector as Mireles (2004) showed. But it is also shown by Heller & Eisenberg (1998). We can also see that in the patents wars between Apple and Samsung for instance (but it may be true for all types of patent wars). I believe this is also part of the tragedy of the anticommons because they obstruct each other from making new innovations. However in the case of “human genes” the authors found evidence that patent do not impede follow-on innovations (Sampat & Williams, 2015). So in the light of the evidence, there seems to be an impediment effect of patent rights on cumulative innovation in some sectors. I believe this could be a big issue in sectors that rely heavily on innovation such as the information technology industry, telecommunications, automotive, pharmaceutical and semiconductors (1). It can impede innovation thus economic growth and harm both consumers in several ways (they could have benefited from a new innovative production e.g.) and even the producer (they could have benefited from a new source of profits or lower costs e.g.). And since I regard the legislator as the state, which by definition is interested in social welfare, the conclusion is straightforward; we should not allow too easily firms to sue and to prevent others from using their innovations when we look at cumulative and complementary innovations. Stephen N. Bretsen and Peter J. Hill, Water Markets as a Tragedy of the Anticommons, 33 Wm. & Mary Envtl. L. & Pol’y Rev. 723 (2009), http://scholarship.law.wm.edu/wmelpr/vol33/iss3/3 Mireles Michael S, An Examination of Patents, Licensing, Research Tools, and the Tragedy of the Anticommons in Biotechnology Innovation. University of Michigan Journal of Law Reform, Vol. 38, p. 141, 2004, https://ssrn.com/abstract=821465 Michael A. Heller and Rebecca S. Eisenberg, Can Patents Deter Innovation The Anticommons In Bioedical Research, Science, http://www.edegan.com/wiki/images/8/88/Heller_Eisenberg_(1998)_-_Can_Patents_Deter_Innovation_The_Anticommons_In_Biomedical_Research.pdf Bhaven Sampat and Heidi L. Williams, How do patent affect follow on innovation? Evidence from he human genome, Working paper, http://economics.mit.edu/files/9778 (1) http://www.businessinsider.com/most-innovative-industries-2015-5 Show less Reply Rotsart Antoine 28 November 2016 It appears pretty clear to me that the theory of the anticommons is a serious matter that have direct effects on cumulative innovation. The initial objective of patent system is undoubtedly to encourage innovation in general, and cumulative innovation seems to be one of the weaknesses of the patent system. Throughout this comment, we will verify whether it is a…Read moreIt appears pretty clear to me that the theory of the anticommons is a serious matter that have direct effects on cumulative innovation. The initial objective of patent system is undoubtedly to encourage innovation in general, and cumulative innovation seems to be one of the weaknesses of the patent system. Throughout this comment, we will verify whether it is a common issue and I will explain why, in my opinion, patent system have opposite effects on cumulative innovation. It is difficult to assess whether the tragedy of uncommons is global issue that affects all markets or just some specific markets. As it was mentioned in the article above, “the positive impact of patent invalidation on subsequent innovation is significant (and large) only in sectors with complex technology” (1). There is however another factor that needs to be taken into account according to Galasso and Shankerman(1): “a high fragmentation of patent ownership among firms”. If these two conditions are met in a particular market, then the patent system becomes a real obstacle to cumulative innovation. However, we cannot say that this is a general trend, given that this seems only to be the case in very specific markets (2). I can understand that sequential innovations – or even complementary innovations- may be hard to put in place in those specific market mentioned above. Indeed, the time and effort that a second-generation innovator has to put by dealing with all the patent holders, plus the the costs of separate licensing makes the new product difficult to launch given its substantial costs. But I think we need to see the bigger picture here, and consider another factor that tilt the balance toward second-generation innovations. Once a new invention is commercialized, and is based on previous technologies, it has the advantage of having a new added value compared to products based on “older technology”. Indeed, it becomes complicated for the older products to follow up the new invention in the market. That is exactly what happened to EMI when they developed and patented their x-ray technology. This technology inspired other subsequent inventions that very soon dominated the market, forcing EMI to get out of it (3). So we can’t just affirm that the patent system deters cumulative innovation, because spillovers allow to generate valuable second-generation innovations that heavily outweighs first-generation innovations in the market. My point is therefore the following: anticommons are indeed a negative effect on cumulative innovation, but I think it is part of the game. Second generation innovation must cope with that in the first place, but then they will enjoy a non negligible advantage compared to first generation innovations. To conclude, anticommons are a genuine issue that appear in very specific markets, and the patent system has a clear opposite effect concerning the cumulative innovations according to me. References: (1) http://www.ipdigit.eu/2014/11/do-patent-rights-facilitate-or-impede-cumulative-innovation/ (2)http://voxeu.org/article/do-patent-rights-impede-follow-innovation (3)http://voxeu.org/article/cumulative-innovation-and-market-value-evidence-patent-citations Show less Reply Jean Seyll 26 November 2016 The main issue here is to discuss about the fact that patents may or may not impede the innovation. As seen in several papers posted on this blog, the question is complicate; with some pros and cons of these patents. I will try here to make my point of view understandable with the help of some examples. The existence of…Read moreThe main issue here is to discuss about the fact that patents may or may not impede the innovation. As seen in several papers posted on this blog, the question is complicate; with some pros and cons of these patents. I will try here to make my point of view understandable with the help of some examples. The existence of patents can facilize the innovation process when you think from the point of view of the creator. Indeed, it protects the innovator’s idea from being stolen and all his ‘’pre-work’’ ruined by someone else. So it assures him to be rewarded for its finding. Another good side from patent rights is the fact that it made the society realize that some of the patents had to be created for the wellbeing of the world. As an example, we can point out the fishing grounds that can be overused and maybe not in the most respectable way if they are not protected by property rights. Patents can also impede the innovation in many ways. Most of the time, innovation need strong bases/pillars to rely on, you don’t always have to start from nothing. So, loads of ‘’new entries’’ are just an added value or feature on one already existing product but the whole operation will need authorization from the patent owner of this existing product or process. This problem can be solved with some arrangements but this will cost lot of resources and energy and lead to an increasing of the product price. It’s inefficient and will impede innovation. This kind of figure is frequent in certain fields such as computer, communication as well as electronics and medical instrument. Another interesting point is the theory about the tragedy of anticommons, often linked with cumulative innovation. The tragedy of anticommons refers to the point that if several individuals own rights of exclusion and exercise those rights, they restrict the access to them and therefore the use of common resources. Depending on the environment, the size of the firms that own those patents and the work field, this can be a serious obstacle to innovation. The aircraft industry in the second decade of the twentieth century was very binding because of the power of the patents. It was almost impossible to build a plane in the USA back in those days and had maybe been a drawback for innovation … In conclusion, patents have like always, pros and cons but it’s obvious that the regulations about patent should differ for special environments like the tech domain. There is a real war in the smartphone industry where everyone is suing everyone because their technologies are highly similar. The public policy should therefore target these specific environments. Bibliography : http://voxeu.org/article/do-patent-rights-impede-follow-innovation http://www.ipdigit.eu/2010/11/an-uncommon-riddle/ http://wealthofthecommons.org/essay/tragedy-anticommons http://www.ipdigit.eu/2013/11/the-smartphone-patent-wars-nothing-really-surprising/ Show less Reply Edouard Fabri 26 November 2016 Patent rights are performing a dual role on innovations. While granting an exclusivity right to the innovator, the publication of the invention makes the invention available to the public. These two roles might lead to opposite effects on cumulative innovations, which are defined as innovations based on already existing ones. Problems may occur when the invention requires previously patented innovations,…Read morePatent rights are performing a dual role on innovations. While granting an exclusivity right to the innovator, the publication of the invention makes the invention available to the public. These two roles might lead to opposite effects on cumulative innovations, which are defined as innovations based on already existing ones. Problems may occur when the invention requires previously patented innovations, leading to negotiation costs. The patented inventions appear then not to be that available as contended by the so-called “disclosure”. Furthermore, the exclusivity right granted to the patentee allows him not only to exclude competitors to use the invention, but it also excludes second stage innovators to benefit from it. As J.L. Ferreira underlines it in his article (How patent rights affect cumulative innovation), it becomes actually a significant issue when a large amount of patented resources is needed, leading eventually to abandoned opportunities. If not abandoned, second stage innovators would have to catch these opportunities by circumventing the patented inventions, leading to inefficiency (waste of time and resources). Moreover, this issue formalized in the tragedy of the anti-commons (reflecting an inefficient use of resources due to exclusivity rights) is expected to grow and occur more frequently as the number and specificity of patented inventions increases. As a result, there is a need of finding an equilibrium between these two effects: How to reward the initial innovator, without excluding others from taking advantage of the patented invention? I do believe a solution could be to raise awareness among first-stage innovators, emphasising that their invention could be a potential source for other inventions and therefore source of value. It would stimulate them to find solutions to benefit fully from their initial invention by making sure it is used for subsequent inventions developed by themselves or developed by second generation innovators. References: Belleflamme, P. (2014, November 20). Do patent rights facilitate or impede cumulative innovation? Retrieved from http://www.ipdigit.eu/2014/11/do-patent-rights-facilitate-or-impede-cumulative-innovation/ Ferreira, J.L. (2015, April 17). How patent rights affect cumulative innovation. Retrieved from http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ Show less Reply Brasseur Sophie 25 November 2016 In this comment my objective will be to discuss on the various arguments concerning cumulative innovations. According to the received wit, innovation is a dominant component of modern growth but incentives to innovate are inclined to the free-rider problem. This raises a critical question: what is the impact of patent rights on cumulative innovation? Cumulative innovation means that, in order…Read moreIn this comment my objective will be to discuss on the various arguments concerning cumulative innovations. According to the received wit, innovation is a dominant component of modern growth but incentives to innovate are inclined to the free-rider problem. This raises a critical question: what is the impact of patent rights on cumulative innovation? Cumulative innovation means that, in order to make a new product, its inventor uses the combination of knowledge contained in previous innovations. So, cumulative innovation is building by knowledge spillovers, as later innovators build on earlier research. With the protection of patents employed to defend innovation, it made the use of common resources difficult. Indeed, some individuals own rights of exclusion and exercise those rights by restricting the access to others. Some empirical studies effectively showed that patent protection can discourage follow-on innovation by firms, if haggling between patent holders and potential licensees deteriorates. However, for the vast majority of patents, the study demonstrates that patents do not impede innovation. This blocking occurs in complex technology areas where later innovators need many different patents to conduct research (such as information technology and electronics industries), but not in other important sectors like pharmaceuticals and chemicals. Blockade also appears to be more concentrated in cases where large firms with patents interact with small innovators. Another interesting case they I found out about is the example of the semiconductor industry. A research has been carried on with results bringing out the multifaceted effects of strengthening patent rights on firms using important cumulative technological setting. There has been demonstrated that the strengthening of US patent rights open up “patent portfolio races” among capital-intensive firms, but also may facilitate entry by specialized design firms during this period. So there is in this case no clear answer as to whether innovations impede innovations or not. To conclude with this subject, although I do not have a clear answer to the problem, even through the various examples, I could say that a solution could be considered. Alberto Galasso and Mark Schankerman, two professors of economics specialized on this question, are of the opinion that: “to encourage innovation, remedial government policies should be targeted; a ‘broad based’ scaling back of patent rights is unlikely to be appropriate. Policies and institutions should facilitate more efficient licensing, promoting cumulative innovation without diluting the innovation incentives that patents provide.” Sources: – http://www.wpz-fgn.com/wp-content/uploads/1460556705_SZ6itWqcy9jo.pdf – http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ – http://voxeu.org/article/do-patent-rights-impede-follow-innovation – https://eml.berkeley.edu/~bhhall/papers/HallZiedonis01%20libecap.pdf – http://voxeu.org/article/patent-rights-and-innovation-small-and-large-firms – http://www.hbs.edu/faculty/Publication%20Files/14-036_88022f59-a293-4a6f-b643-b205304bce91.pdf Show less Reply Maxime Winandy 25 November 2015 The main goal of this comment is to briefly investigate how common anticommons are. Furthermore, it is possible to formulate some relevant observations and arguments regarding the influence of patent rights on cumulative innovation. Anticommons, or the extreme sharing of a resource with the right to prevent others from using it, are a serious and debatable issue when it comes to…Read moreThe main goal of this comment is to briefly investigate how common anticommons are. Furthermore, it is possible to formulate some relevant observations and arguments regarding the influence of patent rights on cumulative innovation. Anticommons, or the extreme sharing of a resource with the right to prevent others from using it, are a serious and debatable issue when it comes to cumulative innovation. Indeed, the simple fact of making sure that every rights holder is compensated properly can be a tremendous task. Moreover, such a configuration can impede innovation by a) making it costly both in monetary terms and in efforts b) plainly and simply prohibiting the use of the patented innovation. A good example of this is found in Biomedical Research where two main issues are encountered : a) creating too many fragments of IP, b) permitting too many upstream patents owners to stack licenses on top of the future discoveries. (1) A striking example of the second cause is found in the aircraft production industry during the second decade of the twentieth century: “[…]it was almost impossible to build an airplane in the United States. That was the result of a chaotic legal battle among the dozens of companies—including one owned by Orville Wright—that held patents on the various components that made a plane go. No one could manufacture aircraft without fear of being hauled into court. “ (2) The solution found by the government, motivated by the imperatives of WWI, was to create a “patent pool”. The overall consensus in the literature seems to be that anticommons are extremely common accross all industries A major issue with anticommons, as stated above, is the difficulty for an “innovator” to assemble all the rights needed to legally take advantage of the innovations protected by the patents. This undoubtedly limits the number of companies able to effectively innovate cumulatively. A very empirical, and somewhat naïve, example that patents aren’t necessary for innovation to take place is that progress occurred for centuries well before the introduction of any patent system. A somewhat more practical example backing this assumption up is that, in many cases, intellectual property can only be obtained via patent under more expensive terms than would have been available had you just to develop it yourself. (3) Finally, a theoretical point of view, observed by Economic historian Eric Schiff, is that countries that got rid of their patent system actually found that it increased innovation. (4) As a last example, which still needs to prove itself, I’d like to cite Tesla Motors. Tesla indeed made all of its patents available to other companies, thus effectively allowing them to a) use said patents to produce their own electric cars b) innovate using said patents as premises for new research. This unusual way of proceeding will yield some interesting results in the upcoming years, both in the car industry, but also in the innovation around electricity storage. (5) This approach closely resembles the one used in “Open-Source” software, allowing multiple parties to innovate around the same core elements. As a conclusion to this comment, it seems difficult to say whether patents increase or impede (cumulative) innovation, but they certainly affect the distribution of innovation across the industry. (1) http://www.sciencemag.org/content/280/5364/698.full (2) http://www.newyorker.com/magazine/2008/08/11/the-permission-problem (3) https://www.reddit.com/r/Economics/comments/6vpgz/the_permission_problem_the_tragedy_of_the/ (4) https://mises.org/blog/patents-and-innovation-2008 (5) https://www.law.berkeley.edu/files/Tesla_Motors_IP_Open_Innovation_and_the_Carbon_Crisis_-_Matthew_Rimmer.pdf Show less Reply Maria Inmaculada Chicon Sarria 25 November 2015 As it is mentioned in the article, patent rights may impede innovation as long as the owner of this patent does not want to share this knowledge in order to improve the innovation. This can be a real problem when there is a need of keep innovating in such sectors as technology, pharmaceutical industries, or any area that could have…Read moreAs it is mentioned in the article, patent rights may impede innovation as long as the owner of this patent does not want to share this knowledge in order to improve the innovation. This can be a real problem when there is a need of keep innovating in such sectors as technology, pharmaceutical industries, or any area that could have difficulties on innovation because of this problem. To the posed question, “which are the effects of patent rights on cumulative innovation?” I found some interesting information about it. For example, in an article by Jose Luis Ferreira, he mentions that specially in the new technology sector, patent rights have not a good effect into cumulative innovation because sometimes a new invention needs the use of previous developments, and if those previous developments have patents it become difficult to be able to benefit of this knowledge. There could be an agreement for the use of this patent and the innovation would be done without problems but there are a lot of negotiation costs that can be a handicap for the innovation. If those negotiation costs didn’t exist, the use of the previous developments would be much easier and that would facilitate the innovation. Also in this topic, Galasso and Schankerman, studied the different effect that patent would have in cumulative innovation. They said that patent rights difficult cumulative innovation in some environments and a possible solution would be the creation of remedial government policies. In my opinion, I think that of course patents should exists but to prevent the type of problems that we are seeing in cumulative innovation, there should be features that facilitate the sharing of the knowledge that is patented within a legal and fair framework. Sources: (1) Jose Luis Ferreira. http://mappingignorance.org/2015/04/17/how-patent-rights-affect-cumulative-innovation/ (2) Galasso and Schankerman http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation Show less Reply Alicia Bastings 25 November 2015 As explained by Professor Belleflamme in this article, the tragedy of anticommons refers to the fact that some IP resources may be under-used because of the exclusivity right it confers to its owner, preventing others to use the innovation. Some cumulative innovations cannot thus be commercialized. Indeed, the licensing costs of the patents you need to put your product on…Read moreAs explained by Professor Belleflamme in this article, the tragedy of anticommons refers to the fact that some IP resources may be under-used because of the exclusivity right it confers to its owner, preventing others to use the innovation. Some cumulative innovations cannot thus be commercialized. Indeed, the licensing costs of the patents you need to put your product on the market become deterring. This, as well explained in the comments below, can be further observed in industries needing a high level of technology and knowledge such as the biomedical and high-tech ones. This phenomenon, of course, leads to question the positive impacts of patents. Indeed, one the main aim of patents is to allow second-generation innovations to be made thanks to the publication of the first-generation ones, avoiding at the same time the inefficient cost of making twice the research for the first innovation. However, the exclusive right of the patent owner, which allows an innovator to capture the benefits of his discovery (and so is essential to give incentive to the innovator to conduct research), is working against this. This creates a great dilemma that regulators still have to solve: How can we promote further innovation on the basis of other ones without restraining too much the rights and gain of the initial innovators? For now, the patent system as it is prevents a lot of second-generation products from being put on the market. However, Richard A. Epstein and Bruce N. Kuhlik state that innovators can also invent around an innovation, and that this is not a « wasteful activity » since it will « expand the expand the options available to others whether that invention is patented or put into the public domain » (Epstein & Kuhllik, 2004, pp. 6). Of course, it would be optimal not to have the research done twice but, as it is impossible if the second-innovator wants to be able to commercialize his product, it is better than not granting any patent at all. Indeed, this will result in even less knowledge transmission. Firms, if they don’t get patents, will then try to keep their inventions secret and the access to them will be greatly reduced, or even worth, there will be a lot less research conducted, as the incentives would have been withdrawn. As a final point, I can add that an other solution to anticommons could be the cross-licensing and pooling agreements (Epstein & Kuhllik, 2004). These would contribute to a wider spreading of patents’ use to several different companies. References: Belleflamme, P. (2014, November 20). Do patent rights facilitate or impede cumulative innovation ?. Retrieved from http://www.ipdigit.eu/2014/11/do-patent-rights-facilitate-or-impede-cumulative-innovation/ Epstein, R. A. ; & Kuhlik, B. N. (2004). Navigating the Anticommons for Pharmaceutical Patents: Steady the Course on Hatch-Waxman. Unpublished, University of Chicago, Chicago. Show less Reply Christopher Preining 25 November 2015 The two opposing groups on the issue of patents both have strong arguments for their positions. To add to this insecure atmosphere on the topic of patents, the economist Fritz Machlup stated: “No economist, on the basis of present knowledge could possibly state with certainty that the patent system, as it now operates, confers a net benefit or net loss…Read moreThe two opposing groups on the issue of patents both have strong arguments for their positions. To add to this insecure atmosphere on the topic of patents, the economist Fritz Machlup stated: “No economist, on the basis of present knowledge could possibly state with certainty that the patent system, as it now operates, confers a net benefit or net loss upon society […]”. (1) Hence, the issue of patents remains a controversial issue in the contemporary economic dialogue. Specifying our rather broad topic of patents and the question of their validity and benefit, let us regard the effect of patents on cumulative innovation and raise the question if the latter promote or decelerate and inhibit subsequent innovations. An interesting investigation on the effect of a strong patent regime in the 1980s United States semiconductor industry – by the economists R. H. Ziedonis and B. H. Hall – comes to the conclusion that the deregulation of patent restrictions lead to a sharp increase in patents and capital expenditures on R&D in the underlying industry. During interviews with industry and firm specific spokesmen indicated that “[…] patent rights are required in order to secure venture capital and other financing for entry as a specialized semiconductor design firm.” (2) The latter remark adds to the conclusion that patent rights facilitate cumulative innovation as financing of R&D for specific products developed by specialized firms (named design firms by the authors) advance the specific industry by providing new technologies for industrial development. By gradually “[…] building larger portfolios of their own [the industry specific firms] “legal rights to exclude” may reduce the hold-up problem posed by external patent owners […]”. (2) At the same time, however, this amassing of patents for the firm’s portfolio leads to negative effects on the industry’s dynamism as “[…] such racing behaviour is not an inevitable outcome of strengthening patent rights in cumulative technological areas.” (2) Synoptically, we can observe both negative and positive effects in the specific semiconductor industry. The strengthening of patent rights lead to an increase in R&D and capital expenditures leading to the patenting of novel technologies and processes. Simultaneously, this previous procedure could simply be described as a “patent portfolio race” by critics. Let us explore this latter subject further. As discussed in class the risk of “over-patenting” remains high and hence establishes the counterargument for patent critics, which claim that a strengthening of patent rights inevitably leads to a hold-up. Especially for cumulative innovations this issue represents a fundamental problem, since innovations build up on a previous break-through. With respect to such an ongoing process the impediment patent races create hinder the dynamism of the technological advancement. As the authors of the book Patents, Citations and Innovations: A Window on the Knowledge Economy describe, “A significant number of citations, maybe something line one-fourth, appear to be essentially noise, even when we limit the analysis to “important” patents.” (3) What the authors describe as “noise” acts as an additional hurdle for firm’s innovation processes. Finding a clear conclusion is made increasingly harder the more in depth the research one conducts on the topic. Strong patent rights stimulate investment in R&D and therefore encourage technological progress, as the same authors of the book Patents, Citations and Innovations assert: “If the obvious “spurious” patents are excluded, two-thirds of citing patents were deemed to represent likely knowledge spillovers.” (3) Concurrently, or with a lag of a couple of years, the firms engaging in intensive R&D investments and research desire their capital expenditures to be worthwhile and hence attempt to “cash in” proceeds of their initial innovations by rapidly increasing their patent portfolios. This trend, however, leads to a deceleration of the innovative process launched by the strengthening of patent rights. The conundrum we face is thus self-made. In a wave like course innovation increases until it reaches a relative maximum and firms start to reap in benefits, licencing fees, start litigation trials etc. and thereby impede development. What better way therefore, than to end the comment with wise words spoken out over 60 years ago by the economist Edith Penrose: “If national patent laws did not exist, it would be difficult to make a conclusive case for introducing them; but the fact that they do exist shifts the burden of proof and it is equally difficult to make a really conclusive case for abolishing them.” (1) Lecture slides. LLSMS2041_07_2015_design.pdf (2) Hall, Browyn H., and Rosemarie H. Ziedonis. The Effects of Strengthening Patent Rights on Firms Engaged in Cumulative Innovation: Insights from the Semiconductor Industry. Diss. Unversity of California at Berkely, U of Pennslyvania, 2001. N.p.: n.p., n.d. Print. (3) Jaffe, Adam B., and Manuel Trajtenberg. Patents, Citations, and Innovations: A Window on the Knowledge Economy. Cambridge, MA: MIT, 2002. Print. Show less Reply Cristina Rujan 24 November 2015 The tragedy of the anticommons appears to be a serious concern regarding the implementation of a patent system within sectors that highly rely on cumulative innovation. For instance, biomedicine is one of the fields where research is heavily dependent on the innovators’ access to the state of the art, to the common pool of scientific knowledge already acquired . Long…Read moreThe tragedy of the anticommons appears to be a serious concern regarding the implementation of a patent system within sectors that highly rely on cumulative innovation. For instance, biomedicine is one of the fields where research is heavily dependent on the innovators’ access to the state of the art, to the common pool of scientific knowledge already acquired . Long (2000) states that the current models of intellectual property rights protection do not take into account that in some research processes patents can be granted at multiple stages. As a consequence, these models are not able to alleviate the tension between a patentholder’s interest in maximizing the profit streams from the patented innovation and the public/private interest in allowing downstream research, especially in the case where innovations have both basic and applied uses (e.g. a specific drug that can be marketed by itself, but that can also serve as a starting research point for a new innovation). This is essentially the problem: the static vs. dynamic approach discussion comes into play again. If the decision of granting a patent fails to take into account the potential effect it can have on prospective follow-up innovations/lines of research, then it is not surprising that in industries where innovation is cumulative, patents are perceived as ‘harmful’. Coming back to the biomedicine example, it is overbroad patents to basic innovations that are particularly known to hinder incentives in the downstream research level. Therefore, the question is not only whether a patent in itself can impede cumulative innovation, but also whether there are specific patents characteristics that seem to foster this negative outcome. Is there any empirical evidence for such a negative effect in the biomedical field? As mentioned above Galasso and Schankerman (2013) indentify a number of difficulties that arise when empirically studying such effects. Williams (2013) investigates whether IP on the human genome influenced subsequent scientific research and product development, and takes into account a specific patent-holder, i.e Celera. The researcher finds evidence that Celera’s IP led to a 20-30% reduction in subsequent scientific research and product development. As part of the methodology, Williams (2013) compares subsequent innovation outcomes for the genes protected with an IP and for non-protected genes that were sequenced in the same year. This procedure overcomes the first problem identified by Galasso and Schankerman (2013). But could give rise to others such as selection bias – namely Celera’s IP-protected genes might have had a lower potential for follow-on research, thus reflecting a lower level of subsequent innovation outcomes. Another potential problem could be that the estimates might reflect a substitution of innovative effort, namely that when facing restricted access to research input, researchers might respond by a shift in their project choices. This can give rise to a new line of inquiry: if the absence of IP is a factor in the decision making process for the line of research of a scientist, the welfare cost of implementing IP should take into account the distortion created because suboptimal projects are chosen . It seems that in this field, more and more questions are to be asked. Even if important steps have been made towards formally proving that IP rights are detrimental for cumulative innovation in some sectors, there are still concerns regarding methodology or robustness.  Long, C. (2000). Patents and cumulative innovation. Washington University Journal of Law & Policy,2.  Galasso & Schankerman.(2013). Do patent rights impede follow-on innovation? CEPR’s Policy Portal  Williams, H. (2013). Intellectual Property Rights and Innovation: Evidence from the Human Genome. Journal of Political Economy, 121(1), p. 1-27 Show less Reply Marie Georges 18 November 2015 The patent system is facing a real challenge as it has to manage the tension between rewarding first-generation innovators and ensuring that second-generation innovators can learn from their ideas and therefore build on them. Although we saw that intellectual patent rights can have a positive impact on incentives to innovate, patents can deter the process of cumulative scientific discovery by…Read moreThe patent system is facing a real challenge as it has to manage the tension between rewarding first-generation innovators and ensuring that second-generation innovators can learn from their ideas and therefore build on them. Although we saw that intellectual patent rights can have a positive impact on incentives to innovate, patents can deter the process of cumulative scientific discovery by excluding follow-on researchers. Indeed, while individual researchers have strong incentives to take advantage of the protection afforded by IP rights, the scientific community would benefit from the diffusion of the knowledge without any fees. The first negative effect reduces the incentives to build cumulatively on each other’s discoveries and the level of ongoing cumulative research productivity decreases. However, these effects would be problematic only if the tax imposed on research productivity outweighs the direct incentive to innovate coming from the patentability (1). This delicate balance provides empirical implications. First, the negative impact of anti-commons is lower when the cumulative scientific ideas can also be covered by IPR. Second, this impact is higher for certain types of researchers and certain types of discoveries. For example, we expect the effect of anti-commons to be higher in the public sector research or for more complex and more important discoveries (1). We can therefore argue that the cumulative innovation process can be supported or limited by the context. As Fiona Murray and Siobhan O’Mahony claim in their article (2), this context is shaped by three conditions: disclosure, access and rewards. Indeed, different disclosure mechanisms like patents, publications, individual conversations or community forums can affect follow-on innovations; changes in the mechanisms used to give access to the knowledge are also important to take into consideration; and as rewards are necessary to encourage the innovators to disclose their ideas and provide access, the management of those through normative or legal mechanisms influence the cumulative innovation. But how changes in those conditions can affect follow-on accumulation? Empirical examples show that such changes are not only driven by the law, but we see that barriers to knowledge accumulation are often organizational ones. We can finally argue that the tension is also present in the biotechnology industry, but does not reflect the real problematic situation. Indeed, biomedical research deals with complex multidisciplinary problems but it is confronted to a legal framework which proceeds by placing one brick upon another by granting patents for each new innovation step (3). In this nonlinear and variable environment, there is a need to adjust the models of propriety rights in order to reflect the research discipline in an accurate way, creating at the same time incentives for innovation. SOURCES (1) MURRAY F., STERN S., “Do formal intellectual property rights hinder the free flow of scientific knowledge? An empirical test of the anti-commons hypothesis”, Journal of Economic Behavior & Organization, 2007, Vol. 63, pp. 648–687 (2) MURRAY F., O’MAHONY S., “Exploring the Foundations of Cumulative Innovation: Implications for Organization Science”, Organization Science, 2007, Vol. 18, No. 6, pp. 1006–1021. (3) LONG C., “Patents and Cumulative Innovation”, Washington University Journal of Law & Policy, 2000, Vol. 2. Show less Reply Emilie Collard 14 November 2015 In this comment, we were asked to investigate how common anti commons are and to find other arguments regarding the effect that patent rights have on cumulative innovations. I would say that, in current times, a lot of companies produce finished goods that have been brought to life after a series of cumulative improvements. If we take the example of…Read moreIn this comment, we were asked to investigate how common anti commons are and to find other arguments regarding the effect that patent rights have on cumulative innovations. I would say that, in current times, a lot of companies produce finished goods that have been brought to life after a series of cumulative improvements. If we take the example of the iPhone, we can clearly see it. The iPhone 6s is actually the iphone 1 which has undergone many improvements over time. In a previous article on the IIdigIT, called ” The smartphone patent wars: nothing really surprising…”, Mister Belleflamme identify two types of cumulativeness in the field of cumulative innovations. The two type of cumulativeness are the complementarity and the sequentiality. The complementarity is the fact that you have a new generation product that results of a combination of previous generation innovations. The problem with the complementary innovations is that if many patents have been granted for the previous generation of the innovation, you will not be able to use the previous generation as “inputs” for the further generations. The allocations of too many separate property rights will have higher prices as a result. We call this “the tragedy of the anti-commons”. The other form of cumulativeness is the Sequentiality. It is the fact that a first-generation innovation leads to further generation innovations. The problem is that the first generation innovation confers to the patent holder the same rights over following innovations. In my opinion, it is clear that the patent protection can impede the cumulative innovation. When firms try to launch new innovations, they must be extremely careful because they can’t use innovations that have been patented without having the licenses to do so! And we know that very little products are completely new innovations. New products include very often innovations that have already been patented and disclosed to the public. It means that companies, when making new product, have to be sure that they can obtain the license they need for each innovation they used in their new product otherwise they will be sue for infringement. All the companies do not have the same budget that they can allow to obtain the licenses they need. This is why, in my view, the cumulative innovation can be deterred by the patent protection. Obviously, all the companies are not equal when facing this problem. Bigger firms may face less problems than small firms to obtain those licenses but I think that it also depends on the sector in which the firms are operating. A concrete example is the firms that produce high-tech products. If we take the example of a computer, we know that firms have to respect some standards. If they have to obtain a high number of patents when making a new device, it would certainly reduce the incentives they have to innovate. I talked about the field of products but the same conclusions can potentially be applied to service companies. I will conclude that patents can have different effects on the innovation. We saw during the lectures that the patents can be seen as an incentive to innovate because they confer a right of exclusion to the patent holder, but also because after receiving a patent, you have to disclose your innovation so the others can see how you did and try to innovate too. However, we can say that when it comes to cumulative innovations, patents can have negative effect. http://www.ipdigit.eu/2013/11/the-smartphone-patent-wars-nothing-really-surprising/ http://www.digitopoly.org/2014/07/17/do-patents-stifle-cumulative-innovation/ Show less Reply Valentine Neudt 13 November 2015 It is difficult to assess how common anticommons are, because the result of an anticommon is something that doesn’t exist that should have been invented wasn’t it for the overprotection or overprivatization. One extra example they give in the New Yorker article is the windpower in the US. Because it is hard to find examples of things that should have…Read moreIt is difficult to assess how common anticommons are, because the result of an anticommon is something that doesn’t exist that should have been invented wasn’t it for the overprotection or overprivatization. One extra example they give in the New Yorker article is the windpower in the US. Because it is hard to find examples of things that should have existed, we could try to find examples of anticommodities who found a way around the anticommodityproblem (but were initially faced by this problem). DVDplayers and the music on the radio are some of the examples given in the New Yorker article . We can not only see the anticommonproblem with patentprotection, but also with copyrightprotection as well. If an artist wants to make a cover of a song or an adaptation to a song, he needs the permission from the original artist, if he doesn’t grant the permission or is too expensive, the new song can’t be recorded. In the paper of Heller & Eisenberg mentioned in the paper, the give some causes and properties of the tragedy of anticommons, which are very valuable to better understand the problem. I think it would also be valuable to research the tragedy of the anticommons trough game theory to understand the dynamics of the problem and the behavior of the different players. One could make a distinction between the repeated game or the single game (in some industries innovations happen frequently, other industries are less innovative). One could also investigate how the players react under asymmetric or perfect information (in some industries it is easier to access information from other firms than in others). Also it might be interesting to investigate the influence of the timing to the cognitive biases. If one has to be the first to license a patent for a new innovation to be developed do the licensor attribute a higher value to their license compared to being the last one, or is it the other way around? According to me, such research could provide new insights and a better understanding to the influence of patent rights on cumulative innovations. Something about the timing of disclosing the information and the different value that goes with it Once we recognized the problem, we should start thinking for solutions. In the case of the U.S. airplane industry the solved the problem by creating a patent pool. A fair and rather easy solution, everybody who contributes get rewarded through licensing fees. So one could easily think to apply this in all other industries. If only it was that easy. Soon question arise about the transaction cost, about higher barriers to enter the industry, higher risks of cartels forming and thus lower competition… Even tough patent pools can work, they can’t allow them to be formed everywhere. So to me, tragedy of the anticommons is a problem that is not yet fully understood and that requires further research and exploration the find welfare-enhancing solutions. Sources: http://www.newyorker.com/magazine/2008/08/11/the-permission-problem; http://spie.org/x37543.xml Show less Reply Valentin Herinckx 12 November 2015 “An anticommons property is a scarce resource in which multiple owners have the right to individually exclude others from its use, and no one has an effective privilege of use. Stalemate results in the tragedy of the anticommons, the underuse of a property.” (1) This tragedy has been a problem for the development of our economies for a long time…Read more“An anticommons property is a scarce resource in which multiple owners have the right to individually exclude others from its use, and no one has an effective privilege of use. Stalemate results in the tragedy of the anticommons, the underuse of a property.” (1) This tragedy has been a problem for the development of our economies for a long time now. From the examples of the past and the present, it is possible to learn a lot about this problem, and how it should be solved. Back in the beginning of the 20th century, because of all the patents for all the components, it was almost impossible to build an airplane in America. It only became doable after the WW1, because something needed to be done to protect the USA (2). In this case, the intervention of the congress putted an end to that problem, but it surely can’t be the solution to all the cumulative innovations problems. What would be the incentive to patent your innovation if you knew that the authorities could strip you away from your protection as soon as it could actually bring you a lot of money? State intervention is therefore not the best and only solution to that issue; it needs to be associated with other measures. In the bio industry, the increasing number of patents might have actually slowed down the innovation. Anticommons are therefore very common in this industry, and it can therefore keep people from creating new drugs, etc. In this case, state intervention is no good solution as well, because it would be in the most cases difficult to call it an emergency. In my view, the state could still play a role in this problem, by facilitating the negotiation between the patent holders and the new innovators. It could be a good move from the state to organize some kind of “patent packages” with the help of the patent holders. Such a measure could lower the transaction cost for the new product and make the procedure easier for everyone! I also strongly believe it would be profitable for the patent holders: in some cases, the procedure and the cost of launching a new product is so long and so difficult that a lot of innovators just give up. Sure the innovation remains protected for the patent holders, but on the other hand if it is an unused patent, it could be a good move for him to sell his rights! Such a package would encourage innovators to pay for the right to use patents, and therefore be profitable for everyone. In conclusion, we can say that patent rights have a lot of negative effects on cumulative innovation, through all the anticommons situations that it creates, but we must remember that this is only the case in some industries. In others, cumulative innovation only requires a few patent rights and thus remains possible. Therefore, there is not a single solution that could apply to all the cases. Like always, the legislator should differentiate its action according to each industry so that innovation can foster while remaining protected through patents. Sources: (1) http://www.cooperationcommons.com/node/412 (2) http://www.newyorker.com/magazine/2008/08/11/the-permission-problem Show less Reply Aurélia Job 3 December 2014 Anticommons opportunities lead to an emphasized opportunistic behavior and anticommons dilemmas induce a greater tendency for ineffective use in respect to commons situations.(1) Therefore, anticommons side-effects are more extreme than commons’. A first example of anticommons is railroad track which is qualified as a natural monopoly. In France, Railroad tracks has been built by independent actors who eventually merged in…Read moreAnticommons opportunities lead to an emphasized opportunistic behavior and anticommons dilemmas induce a greater tendency for ineffective use in respect to commons situations.(1) Therefore, anticommons side-effects are more extreme than commons’. A first example of anticommons is railroad track which is qualified as a natural monopoly. In France, Railroad tracks has been built by independent actors who eventually merged in order to share maintenance costs and generate scale economies. At the end a national monopoly the SNCF who was in charge of both the infrastructure and its utilization. Later on, a split has occurred. Privatization is slowly ongoing, back to the initial situation in which railroad tracks were at their beginning. A second example of anticommons can be found in telecommunication. If we take the fiber cable, we see that operators do not want to invest implementing it if they cannot secure a monopoly on the commercialization of their utilization. It means that countryside cities won’t benefit from this technological improvement which could lead to positive externalities. The solution that has been implemented in France is to make the customer pay a subvention for installation of the optic cable. A third example can be found in high-tech devices. If a company needs 250 patents (often because of standards) to make a device, they won’t produce it nor improve the concept as it regards both sequential and cumulative innovations.(2) In order for companies to comply for patent laws, a solution has been brought which is known as fair, reasonable, and non-discriminatory terms (FRAND). When industry standards are fixed by pairs, FRAND certify the patent to meet the fixed standard as essential and thus is accessible to competitors under certain conditions. Those 3 examples which consist in 3 different forms of monopolies stress by extrapolation the importance of the fundamental patent accessibility. In those 3 examples, we can easily see moves from anticommons to commons and vice versa. More importantly, as recently published(3), the removal of patents can lead to a larger amount of derived innovation. This amount of derived innovation is even larger when the patents are used in industries which are qualified as complex. This hint patent rights should be tailored to the related industry. Sources: (1)Vanneste, Sven, Alain Van Hiel, Francesco Parisi, and Ben Depoorter. “From “tragedy” to “disaster”: Welfare Effects of Commons and Anticommons Dilemmas.” International Review of Law and Economics: 104-22. Print. (2)http://www.ipdigit.eu/2013/11/the-smartphone-patent-wars-nothing-really-surprising/ (3) Galasso, A. and Schankerman, M. (n.d.). Patents and Cumulative Innovation: Causal Evidence from the Courts. SSRN Journal. Show less Reply Mayank Singhal 2 December 2014 We could take the example of the biopharmaceutical industry. This is an industry that has seen substantive horizontal and vertical integration. Hence, the roles of patents becomes very important in this sector, moreso as the industry relies heavily on cumulative innovation. However, it is necessary to create a fine balance between the economic benefits for a company in the sector…Read moreWe could take the example of the biopharmaceutical industry. This is an industry that has seen substantive horizontal and vertical integration. Hence, the roles of patents becomes very important in this sector, moreso as the industry relies heavily on cumulative innovation. However, it is necessary to create a fine balance between the economic benefits for a company in the sector and the broad social benefits that accrue from innovations in this sector. In simpler words, there is a need to preserve competition in this sector along with ensuring sufficient benefits for indulging in innovation. Peter Ringrose, teh R&D chief at Brystol Meyers Squibb once commenetd on the difficulties faced by his firm for not being able to secure licensing rights from upstream patent holders resulting in significant delays for several projects. This is one example which shows that having patents might lead to complications in teh case of cumulative innovation. Again, the Cohen Boyer method of introduction of genes into host cells was owned by an academic institution. They licensed it at reasonable rates ensuring several agencies involved in DNA recombination technology had access to it. The same might not have been possible had a single vertically integrated firm owned the rights(it might have reserved the rights just for itself) So, concluding, I would like to state that patents even in the same sector may have varied effects on innovation. It often depends upon the kind of patents, the kind of players involved and the nature of the specfic technology in question. Show less Reply Ricardo Carvalho 2 December 2014 While researching the topic of anti commons, I found it to be particularly striking the link that this issue has to other scenarios in general economics, such as prisoner's dilemma, in the sense that often, it is very hard to reach an optimal solution, when one (of the many) parties involved is concerned solely with improving its situation, creating an…Read moreWhile researching the topic of anti commons, I found it to be particularly striking the link that this issue has to other scenarios in general economics, such as prisoner’s dilemma, in the sense that often, it is very hard to reach an optimal solution, when one (of the many) parties involved is concerned solely with improving its situation, creating an inefficiency, that not only reduces general welfare, but also reduces personal income in those given situations where it is a sole party that doesn’t budge to the wishes of the rest of the holders. I believe that a great way to understand more about this subject (in my personal case) had to do with the explanation, not only of the general case, but how this problem can apply to a certain industry, and nonetheless one of the industries quoted in “Galasso and Schankerman (2013)”, the medical industry. The article in question is the following one, by ScienceMag: http://www.sciencemag.org/content/280/5364/698.full Regarding how common this issue actually is, I found a perfectly relatable example to be that of licensing the use of certain spaces for use (such as stores in malls, etc.). Who, amongst us, has not passed by a row of empty stores, only to wonder what is the reason for such inefficiency? In my particular case, I have seen some cases in my home country (Portugal) where entire buildings are built, and then are left unoccupied, due to the stubbornness of the different holders in cooperating. Turns out that this is one of the best ways to explain the tragedy of anti commons. When several parties have stakes in the right for a certain good (however tangible it is), and they don’t reach consent with another party to license it, maybe even due to the reluctancy of a single one of those parties, this tragedy is reached, and inefficiency is created. But concerning the actual conclusion of the authors of the study, that claims that invalidated patents earn 50% more citations on average (albeit with some important variation across industries), I find that this analysis is a bit problematic, due to a couple of factors. As stated by the authors, indeed, the largest increase in patent citation happens in the more complex industries (Medical, Electrical and Electronic, Computers), with rates going over 300% in the medical case. For me, on top of this being a possible causality, it is also a warning sign. Following basic logic, if I were to develop a new invention in this field, I would very liberally quote ANY invalidated patents that I would find to be even remotely relevant, just to “cover all grounds”, and since there is absolutely no reason not to. Even if I overreach in the invalidated patents that I will cite in my work, one could argue that it only brings positive outcomes on two factors: First, I have absolutely nothing to pay in royalties when an invalidated patent is concerned. Second, in case litigation arises from a legitimate patent comes around, quoting invalidated patents gives me a stronger link to those patents, while at the same time weakening the link to the valid patent and giving me the possibility of arguing that the valid patent should in fact also be invalidated. Granted, the possibility of the former cases might not seem entirely realistic on a simple case of patent dispute. But when we are in those extremely complex industries (Medical, Electrical and Electronic, Computers), patent litigation often last for years, and every single argument, connection or similarity is a weapon to use in court. Recently, we have the case of Samsung v. Apple, but it is also relevant to look at the older case (in my opinion very relevant) of Nokia v. Qualcomm, in which both companies fought (successive litigation) over patents related to patents build upon original mobile standards like GSM. The complexity of these cases drags them in court for years, and can be ruled on based on very subjective arguments, for which any connections like these always help. I am still a firm believer that a comprehensive approach is the best solution for patents in general, and in this case in particular, I believe in 2 main policies: reducing the time of exclusive patents to a shorter period (possibly around 5 years, as I have argued in previous comments that is more than enough time for an industry to completely change), and having a “mandatory licensing” statue (as argued in last week’s comment) that limits royalty payments to a reasonable rate. While last week I argued as 5% as a possible limit where a sole company/patent license is concerned, but maybe 10% or 15% could be a more reasonable rate to put as an absolute maximum that a company must pay, regardless of how many layers of patents exist (in the case of cumulative innovation), but forcing companies to allow their knowledge to be used. In this case, once the 10 or 15% were reached, the only decision required would be how to split those revenues between the original patent holders, while not hampering innovation on the side of the company actually developing a final product. Show less Reply João Costa 2 December 2014 Patent rights, or more generally all IP, were created and implemented as a way to reward the investment in innovation. This strategy to encourage inventors or companies to invest in R&D may not be perfect, (as discussed in many other articles of this blog) but suggesting that the real effect is the opposite is putting into question the hole IP…Read morePatent rights, or more generally all IP, were created and implemented as a way to reward the investment in innovation. This strategy to encourage inventors or companies to invest in R&D may not be perfect, (as discussed in many other articles of this blog) but suggesting that the real effect is the opposite is putting into question the hole IP system. However, cumulative innovation is still one of the weaknesses of the actual patenting model. This problem applies when the rewards of a first innovation (in a economic perspective, the returns don’t cover the costs) are not enough to incentive the inventor to innovate. In this situation there are maybe 3 solutions: – The state partially subsidizes research, usually by offering grants or prizes (Should we praise the prizes?); – Enlarge the patent breadth giving partial rights to the first patent owner over subsequent innovation; – Wait for the market to develop the right conditions to the innovation to occur. Either improving efficiency (reducing the cost to innovate) or reaching enough capital to incur both first and second innovation in the same company. It is possible to find examples of this 3 different types of solutions but none of them is perfectly efficient in the society point of view. Since it is the one directly related to the patent legislation we’ll analyze more deeply the second one. In this case where the rewards of a first innovation don’t pay the costs, the idea of enlarging the rights to subsequent innovations seems logic, and licensing the respective patent would be the natural reaction in the markets. The reality however, is much more complicated. Making an analogy, if everyone may show interest in baking a cake, the problems appear in the time to divide it. Due the specific characteristics of knowledge it is hard to until where the rights of the first patent cover the second one. A narrow patent will not give enough incentives for the first innovator and a too broad one will neutralize the incentives for the second. A midterm is often what is looked for, but the optimal patent design depends on very specific characteristics of each market or situation and cannot be generalized. For that reason, the patent system fails sometimes in leaving enough incentives for the subsequent innovations, leading to innovation “hold-ups” and patent thickets; this situation is often referenced as the “tragedy of the anti commons”. The examples given in the article are very clear showing the retard in innovation caused by this solution (“ the removal of patent protection leads to about a 50% increase in subsequent citations to the focal patent “). To conclude and state my personal position in this issue I would say that patent system is the best imperfect solution in the most of the situations. To improve its success, it is important to assure the cooperation between later and previous innovators, either by licensing or by mutual agreements. As I also defended in previous comments (Is R&D cooperation a steppingstone to collusion?) the R&D cooperation could be encouraged in order to redirect litigation expenditures to innovation, if the consequences in the competitiveness of the market are not specially large (collusion is likely to occur). Here in this context the same cooperation can work positively in enhancing the development either by allow gin a cooperative group to do both first and second innovation (by sharing costs) or by allowing “defensive patent aggregations”. The state can also have an active roll as stated in the article The smartphone patent wars…. Show less Reply Beili Zhang 2 December 2014 After reading the articles concerning the effects of the anticommons, we can conclude that indeed, “that patent protection (or other IP changes) might deter cumulative innovation”. (1) Indeed, while the level of the impact can differ from a sector to another, those most concerned about these negative are the biotechnology, semiconductors, computer software and e-commerce fields. (1) This conclusion is not…Read moreAfter reading the articles concerning the effects of the anticommons, we can conclude that indeed, “that patent protection (or other IP changes) might deter cumulative innovation”. (1) Indeed, while the level of the impact can differ from a sector to another, those most concerned about these negative are the biotechnology, semiconductors, computer software and e-commerce fields. (1) This conclusion is not really surprising considering the large use of patents in these sectors (5000 patents relating to microprocessors alone, were granted in the US in 1998, (2)). This leads to the consequence that nowadays, it became almost impossible to innovate in these sectors without infringing a patent, intentionally or not. The effects of anticommons on stifling the cumulative innovation in these sectors can be explained by several points. One of the reasons is that given the facts that the companies seeking to produce their innovation must obtain a license from each rights holder to avoid copy infringement, smaller firms don’t have enough financial resources in order to pay them up and as Janet Hope said on cumulative innovation in the agriculture sector “The last few years have also seen a series of mergers and acquisitions that have dramatically consolidated the industry, with a huge portion of fundamental research tools ending up in the hands of a tiny number of big multinationals. This level of industry concentration has inevitably led to the overpricing of technologies and the exclusion of innovative start-ups and public sector institutions. This, in turn, means that smaller firms can’t get a foot in the door.”(3) Another thing is that given the considerable financial burden of paying all these patents, the companies will concentrate only on the more profitable innovations, another stifling factor. For example in the biomedicine sector as Steve Webber said “Market forces will naturally tend to direct efforts by big private sector players to where there is the most substantial return on investment. This means research goals are inevitably being narrowed to those that will be most profitable, though not necessarily most useful (4). In conclusion, while the level of impact can defer from a sector to another, the patents rights do impede cumulative innovation because of the financial burdens that they entails and thus posing entry barriers for smaller firms and reducing the scope of cumulative innovations possibilities by only concentrating on the more profitable one. (1) &(2) http://www.digitopoly.org/2014/07/17/do-patents-stifle-cumulative-innovation/ (3) http://www.nber.org/chapters/c10778.pdf (4) http://p2pfoundation.net/Open_Biology (5) http://p2pfoundation.net/Tragedy_of_the_Anti-Commons Show less Reply Simon Verhaeghe 2 December 2014 Nowadays, there is no doubt that cumulative innovation is central to economic growth. As far as we can see the environment evolution had changed thanks to multiples cumulative innovations. There exist different types for these innovations which are based on older(s): - Sequential innovations refer to the fact that a particular innovation leads to second- …Read moreNowadays, there is no doubt that cumulative innovation is central to economic growth. As far as we can see the environment evolution had changed thanks to multiples cumulative innovations. There exist different types for these innovations which are based on older(s): – Sequential innovations refer to the fact that a particular innovation leads to second- generation innovations. The inventor of glass induced several new innovations (such as window, sunglass or watch). – Complementary innovations refer to a second-generation product which requires the input of a number of different first-generation innovations (such as most of the current new technologies). Through that, it could be understanding that the entrepreneurs spending times and moneys in R&D to obtain such innovative products/ services want to protect it. That could induce the increasing proliferation of patents and the fragmentation of ownership rights among ﬁrms raise transaction costs, constrain the freedom of action to conduct research and development, and expose ﬁrm to ex-post holdup through patent litigation. Overall, few innovations are right now first to lead researches without refer to former’s ones, but it is extremely rare and I will not take into account in my comment. After that, when I think about the opportunity for the first innovator to protect his R&D, I totally agree but I assume that this protection should be restricted by a kind of patent policy. Because, without this body to control the conflicts among first and second innovator, the opportunity to be the first led to bad faith and abuses (such as patent troll). But when I look further in the history and the agricultural Indian case, I see that a big company (Monsanto) had patented some seeds. Considered as the first to find them, each one who used them had to pay a license. Fortunately, the Indian government revoked these patents. Today, I see that US patent policy is also trying to avoid this infringement of this common resource. Through this example, I believe that an improvement is possible but too slow. In order to allow the most efficient trade-off between upstream and downstream, no one should decide if license is needed (and the price) but it has to be regarded more scrutiny by a patent policy officers. Show less Reply Rosa Elena Alvarez 2 December 2014 In many industries finished products are the result of multiple cumulative improvements of an initial invention. There are two kinds of innovations: sequential and complementary innovations. The main problem of complementary innovations appears when too many patent rights are granted for first generation innovations that will be used as inputs for a second generation product. It is called “the tragedy…Read moreIn many industries finished products are the result of multiple cumulative improvements of an initial invention. There are two kinds of innovations: sequential and complementary innovations. The main problem of complementary innovations appears when too many patent rights are granted for first generation innovations that will be used as inputs for a second generation product. It is called “the tragedy of the anti-commons”. These patent overlapping increases the total prices, as explained in the post “A primer on cumulative innovations”. In one hand, according to Heller and Eisenberg (1998) the tragedy of the anti-commons is produced when “multiple owners each have a right to exclude others from a scarce resource and no one has an effective privilege of use”. The results are higher total prices, under-provision of cumulative innovation and the negative welfare effects that it could produce. They argue that granting too many patent rights in biomedical research may delay the discovery and production of life-saving products. In practice, however, Heller and Eisenberg (1998) suggest that in order to avoid tragedy requires that antitrust authorities consider the trade off between “to ensure boundaries of upstream patents and minimize restrictive licensing practices that interfere with downstream product development”. In the other hand, Depoorter, B., Parisi, F. and Schulz, N (2003) explains that the fragmentation in property should not allow fully internalize the cost created by the enforcement of their right to exclude others. In their paper, it is suggested that “the results of underutilization of joint property increase monotonically in both (a) the extent of fragmentation; and (b) the foregone synergies and complementarities between the property fragments.” Finally, the effects that patent rights have on cumulative innovations could be compared with R&D cooperation in the presence of spillovers. Cooperation is accepted and even encouraged by competition authorities in order to avoid underprovision of R&D and the tragedy of anti-commons, coordination at the upstream patents could be accepted in the form of patent pools and cross licenses, as it is suggested by Shapiro (2000). Heller, M., Eisenberg, R. (1998) Can Patents Deter Innovation? The Anticommons in Biomedical Research Depoorter, B., Parisi, F. and Schulz, N.(2003) “Fragmentation in Property: Towards a General Model”, Journal of Institutional and Theoretic Economics, Vol. 159, 594-613, Shapiro, C. (2000) “Navigating the patent thicket: Cross Licenses, patent pools, and standard setting. “ Show less Reply Alexandre Germys 2 December 2014 Nowadays, we can say that all innovation comes from a previous innovation. It is really hard to find something that has been totally invented on basis of nothing during the last ten years. According to that, it would be exagerated to say that patents are totally blocking the innovation because new products are created every month by using technology and…Read moreNowadays, we can say that all innovation comes from a previous innovation. It is really hard to find something that has been totally invented on basis of nothing during the last ten years. According to that, it would be exagerated to say that patents are totally blocking the innovation because new products are created every month by using technology and designs of a lot of previous innovations. The only problem is to find good contracts between all the firms involved in a new innovation, so in other words between the firms using the patents for the new innovation and the firms owning the patents of the previous innovations. An explicit agreement between the first and the second innovator is the most beneficial way to manage the issue of patent. Allowing another to use your patent to create a new product through an agreement is better than blocking the innovation by asking for the real price for the patent. It is more interesting to share the benefits with the newcomer than to no longer have a product using our patent on the market. For example, Microsoft and Intel have worked together for a long time now, and they have shared many innovation. We can still find citation of Intel’s patents in Microsoft’s ones and vice-versa. We can distinguish the external patents and internal patents. Internal patents are patents that are owned by the firm using them to make the new innovation, and external patents are patents from external firms used by the innovator. According to a study realized on about 1,200 US patenting firms between 1981 and 1997, it is shown that there is a positive relationship between market value and internal citations of patents. So firm using their own patents to create new innovation are raising their value. On the other hand there is a negative relationship between external citations of patents and market value. So we can say that external patents are restricting the development of the market. In conclusion, patents are not impeding the incentive to innovate but they makes obstacle to the gain of value of the market in which we use them. Sources: http://www.sciencedirect.com/science/article/pii/S0167718705000640 http://www.voxeu.org/article/cumulative-innovation-and-market-value-evidence-patent-citations Show less Reply Copay 2 December 2014 As it is stated in most literatures related to patents and cumulative innovation, in the paper « Can Patents Deter Innovation? The Anticommons in Biomedical Research » (Michael A. Heller, et al., 1998), the authors remind that the “tragedy of the commons” metaphor helps explain why people overuse shared resources. They addressed a different tragedy, they predict that the proliferation…Read moreAs it is stated in most literatures related to patents and cumulative innovation, in the paper « Can Patents Deter Innovation? The Anticommons in Biomedical Research » (Michael A. Heller, et al., 1998), the authors remind that the “tragedy of the commons” metaphor helps explain why people overuse shared resources. They addressed a different tragedy, they predict that the proliferation of intellectual property rights would give birth to an “anticommons” tragedy. In this case, people underuse scarce resources because too many owners can block each other. This latter tragedy refers to the complex obstacles that arise when a user needs access to multiple patented inputs to create a single useful product. “Each upstream patent allows its owner to set up another tollbooth on the road to product development, adding to the cost and slowing the pace of downstream innovation” (Michael A. Heller, et al., 1998). Importantly, according to the authors, in theory, in a world of costless transactions, people could always avoid commons or anticommons tragedies by trading their rights. Unfortunately, in reality, avoiding tragedy requires overcoming transaction costs, strategic behaviors, and cognitive biases of participants, with success more likely within close communities than among hostile strangers as this is the case in practice. They claim that there are two mechanisms by which a government might create anticommons. The first is by creating too many concurrent fragments of IP rights in potential future products. The second is by permitting too many upstream patent owners to stack licenses on top of the future discoveries of downstream users. Note that this paper focuses on biomedical research. They stresses that privatization of biomedical research must be more carefully deployed to sustain both upstream research and downstream product development. Otherwise, more intellectual property rights may lead paradoxically to fewer useful products for improving human health. In a paper, “How do patents affect follow-on innovation? Evidence from the human genome” (Bhaven S and Heidi L. Williams, 2014), the point of view of the authors is more balanced. Indeed, it appears that the effect of patent on cumulative innovation is a big debate for economists. Theoretical literature has ambiguous predictions for how patents will affect follow-on innovation. The work of Suzanne Scotchmer predicts that patent rights holders over pioneer innovations will find a way to ensure that follow-on innovators do their innovations and get paid enough to make it worthwhile. The reason is that it is mutually beneficial for that follow-on innovation to occur and in typical Coasian fashion. To be sure, the follow-on innovators would prefer not to pay the pioneer patent holder but that is secondary to the issue of whether the innovation actually takes place. The Sampat-Williams evidence suggests that for most patent holders, the pioneer innovations do not end up blocking follow-on innovation (“Do patents stifle cumulative innovation?” (Gans J, 2015)) Bhaven S and Heidi L. Williams state that other literatures predicts that if innovation takes place in multiple firms, then follow-on innovation may be lower than socially optimal due to the problem of how to divide the profit across firms. It has been assessed that this profit division problem could be exacerbated if transaction costs hinder cross-firm licensing agreements. Neverthless, survey research by Cohen, Walsh has suggested that academic researchers adopt ‘working solutions’ to patents such that patents do not hinder follow-on innovation. This can be the case with patent infringement. Some authors have defended the facet that patents may facilitate investment and technology transfers across firms, which may increase incentives for follow-on research and commercialization. Taken together, this motivates the need for empirical evidence to inform the question of how patents affect follow-on innovation. In the paper « Can Patents Deter Innovation? The Anticommons in Biomedical Research » (Michael A. Heller, et al., 1998), the authors claim that recent empirical literature suggests that communities of intellectual property owners who deal with each other on a recurring basis have sometimes developed institutions to reduce transaction costs of bundling multiple licenses. For example, this is the case in the music industry. Accordinf to the authors, copyright collectives have evolved to facilitate licensing transactions so that broadcasters and other producers may readily obtain permission to use numerous copyrighted works held by different owners. Similarly, in the automobile, aircraft manufacturing, and synthetic rubber industries, patent pools have emerged, sometimes with the help of government, when licenses under multiple patent rights have been necessary to develop important new products (Michael A. Heller, et al., 1998). However, they stress that it could be that patent anticommons could more intractable in biomedical research than in other settings. Indeed, the authors think that patents matter more to the pharmaceutical and biotechnology industries than to other industries, firms in these industries may be less willing to participate in patent pools that undermine the gains from exclusivity. Moreover, the lack of substitutes for certain biomedical discoveries may increase the leverage of some patent holders, thereby aggravating holdout problems. Rivals may not be able to invent around patents in research aimed at understanding the genetic bases of diseases as they occur in nature. High transaction costs, conflicting goals of owners of patent or conflict in agendas can make the situation even worse. Owners can deploy their rights to block the strategies of the others, they may not be able to reach an agreement that leaves enough private value for downstream developers to bring products to the market. Bhaven S and Heidi L. Williams (2014), “How do patents affect follow-on innovation? Evidence from the human genome” Gans J (2015) “Do patents stifle cumulative innovation?” Michael A. Heller, et al. (1998) « Can Patents Deter Innovation? The Anticommons in Biomedical Research » Show less Reply Thomas Busschot 2 December 2014 "Until a short time ago, the tragedy of the commons was the only tragedy in town. However, Michael Heller recently introduced the concept of the "tragedy of the anticommons," and has systematically explicated its effect.The tragedy of the anticommons is, in many ways, the mirror image of the tragedy of the commons. Anticommons property exists where multiple owners have a right to exclude others…Read more“Until a short time ago, the tragedy of the commons was the only tragedy in town. However, Michael Heller recently introduced the concept of the “tragedy of the anticommons,” and has systematically explicated its effect.The tragedy of the anticommons is, in many ways, the mirror image of the tragedy of the commons. Anticommons property exists where multiple owners have a right to exclude others from a scarce resource, and no one has an effective privilege of use.”  If we take a quick look at the litterature, we can immediatly acknowledge that the Tragedy of the Anticommon is an (in)famous effect of the patent system. As explained in the article of Pr. Belleflamme, they are particulary present in sectors like electronics, communications and bio-medicals (genes). Is the Tragedy of the Anticommons common ? Though some industries are really hurt by this Tragedy, we don’t think this is a general effect on all the markets, as Galasso suggested : “Overall, our findings show that patent rights block cumulative innovation only in very specific environments”  Other empircal/theoritical arguments over the effects the patent system have on cumulative innovations ? The reader might want to take a look on my third reference (  ). The author seems to have read Galasso and Schankerman and presents the work of Sampat and Williams over the effect of the patent system on follow-on innovations. Let me draw your attention on those presice lines : Prior to this paper, had you asked the 200 economists in the room at the NBER what they thought the outcome would have been, it is fair to say, all of them (including myself) would have predicted that patents would have a negative impact of at least 10 percent. This probably included the authors. As it turned out, the paper showed that those magnitudes in reduction could be rejected statistically. But more to the point, the paper presents pretty convincing evidence that you cannot reject zero as the likely prediction. That is, the effect patents on follow-on research appears to be non-existent […] If we actually look at the economic theory literature on cumulative innovation and patenting, especially the work of Suzanne Scotchmer, we would find that literature predicts that patent rights holders over pioneer innovations will find a way to ensure that follow-on innovators do their innovations and get paid enough to make it worthwhile. The reason is that it is mutually beneficial for that follow-on innovation to occur and in typical Coasian fashion, it works out. To be sure, the follow-on innovators would prefer not to pay the pioneer patent holder but that is secondary to the issue of whether the innovation actually takes place. The Sampat-Williams evidence suggests that for most patent holders, the pioneer innovations do not end up blocking follow-on innovation — at least not because they happen to have a patent. In my mind, this suggests that as a matter of economic modelling, we would do well to abandon as a default our assumption that innovative effort and investment are inherently non-contractible. Somehow, despite formidable measurement issues, there is some way to work out how hard it is (or was) to come up with the follow-on innovation and to take that into account. The paper of Sampat and Williams is available here : http://conference.nber.org/confer/2014/SI2014/PRINN/Sampat_Williams.pdf In short words, the conclusion of Sampat & Williams seems to be that we cannot deny a zero effect of the patent system over cumulative innovations. Therefore, I am personnaly mitigated over the effect of the patent system over cumulative innovations. Both the arguments of Galasso and William seem relevant to me. Source :  Dan Hunter, “Cyberspace as Place and the Tragedy of the Digital Anticommons” , 91 Cal. L. Rev. 439 (2003). Available at: http://scholarship.law.berkeley.edu/californialawreview/vol91/iss2/4  Galasso, Schankerman, “Do patents rights impede follow on innovation ?”, 14 may 2013, consulted online at : http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation  http://www.digitopoly.org/2014/07/17/do-patents-stifle-cumulative-innovation/ Show less Reply leonce mpawineza 2 December 2014 It wont be wrong to state that in the 21st century, majority of the inventions are now considered of a second generation whereby they use knowledge or have to combine other inventions owned by other innovators to come up with a new product on the market. Since the first generation innovations can not be used by the second firm for…Read moreIt wont be wrong to state that in the 21st century, majority of the inventions are now considered of a second generation whereby they use knowledge or have to combine other inventions owned by other innovators to come up with a new product on the market. Since the first generation innovations can not be used by the second firm for free in order to try out its new innovation on market, this makes majority of firms not be able to risk spending on R&D because they might not be able to recoup the heavy investments which includes royalties/rent/tax or patent fee that they have to pay to the first generation innovator. This is why the patent right cannot be considered to facilitate cumulative innovation. Patent thickets,anti commons,patent pools and sometimes cross licence have become a major characteristic in industries of biotech,software,IT,semiconductors etc.This is hindering continuous innovation that could be considered to be of social welfare especially when the innovation are coming from small and medium firms who cant risk the investment on purchasing the patent rights. Regardless patent right not facilitating cumulative innovation, they should not be abolished but should be made flexible by antitrust authorities especially when it comes to their duration of monopoly use because 20 years can be a very long period. Abolishing them on the other hand wont provide any incentives for firms to do R&D. However there are certain incidences that the law ignore these patents due to public interest like the case of myriad from the USA a patent holder on the genes that show to indicate the propensity of breast cancer, exercised their rights with respect to application that build on that knowledge most notably testing for the gene. the supreme court decided against myriad and opted to restrict the patent right so as to promote cumulative innovation. Show less Reply Dernicourt Anthony 2 December 2014 Well, first of all, I will just come back to the patent market. Encourage innovators to collaborate with appropriate partners can already lead to patent sharing, but of course with royalties. If governments try to encourage patent sharing (by giving subsidies for example, helping firms to pay their royaltier), then the problem for cumulative firms can be partially avoided. So…Read moreWell, first of all, I will just come back to the patent market. Encourage innovators to collaborate with appropriate partners can already lead to patent sharing, but of course with royalties. If governments try to encourage patent sharing (by giving subsidies for example, helping firms to pay their royaltier), then the problem for cumulative firms can be partially avoided. So this gives an additionnal incentive to the governments in order to help the patent market. So, speaking about the tragedy of the anticommon, what we can first say is that it depends on the bargain environment in which you are. And then we can speak again about what was said before about patent markets. If the bargain environment is good in your area, of course it will facilitate creation of cumulative innovations with patents getting invalidated. So this can also explain the 50% increase. Patents are so responsible for a lot of issues but not only. But, time to get to the point. Speaking about links between cumulative innovations and patents, we can also speak about timing issues. Being able to use a patent from another firm/innovator takes time. When you are developping a cumulative innovation, you will have some needs at some moments, and these needs can be required to go to the next step. Being stucked because of the waiting of a patent can lead you to wait a long and so have some cumulative projects taking more time than expected. This timing dimension is one of the reasons that without any patent restriction, cumulative innovations are more frequent. Royalties are cost, but time also ! The, I will add that this kind of collaboration could potentially arouse the interest of the innovator that has the patent needed. This innovator will then know that others firms are developping something with his own innovation. So it can give him incentives to make similar thinks, or just wanting to know more stuff. The firms that would like to acquire the use of a patent has a risk of information discovering from other innovators/firms. So in conclusion, time and informations are also taken into account in the tragedy of the anticommon, that can give a new dimension (more incentives) for patent markets. Sources : – http://www.nber.org/papers/w20269 – Show less Reply Aymeric de Pret 2 December 2014 As we’ve seen before, anti commons have a negative impact on the researches for further innovations. Indeed in order to exploit his incremental innovation, a firm has to take time to negotiate, sign contracts and pay licenses fees to all the other firms that has a patent linked to the innovation. these are most of the time huge costs a…Read moreAs we’ve seen before, anti commons have a negative impact on the researches for further innovations. Indeed in order to exploit his incremental innovation, a firm has to take time to negotiate, sign contracts and pay licenses fees to all the other firms that has a patent linked to the innovation. these are most of the time huge costs a company cannot allows to add to its production costs if it wants to be profitable. Therefore this effet decreases innovation. Nevertheless in some sectors the effect is more contrasted. For instance in the computing industry, many programs are made of elementary informatics « bricks » that are open source and which in turn use programmation languages. Any new program in this industry is thus a cumulative innovation but since they are open source everyone can make further innovations. However, as the internet has been growing a lot those past decades, new protocoles and innovations are needed. Of course it will require huge investments in order to innovate and some of the main stakeholders (the world wide web consortium) of internet are wondering if some protocols should remain in the public domain or not. Licenses to use some protocols would allow to finance the researches and further innovations but most of the programers are afraid to develop something that could be infringing a random patent what reduces thus the incentives for innovation at an other level. In my opinion, in order to reduce the negative effet of patent rights on cumulative innovations, those patent should be restricted. The patent should avoid other firms to commercially use this innovation but not to develop and make profit on a further invention if this one is big enough. Therefore a company could avoid direct competition but others would try to innovate even more. Of course the first company could benefit from the second innovation. Therefore there could be a kind of race to always further innovate. No matter what the policy is, it should encourage cumulative innovation without withdrawing the incentives of the patent in it self. As it is mentioned in the paper of Furman, Jeffrey and Scott Stern (2011), could be the development of institutions such as the biological ressource center in the US which allows to reduce some transactional costs. http://www.cerna.ensmp.fr/Documents/cerna_regulation/FL-YM-proprieteIntelle-2.pdf Furman, Jeffrey and Scott Stern (2011), “Climbing atop the Shoulders of Giants: The Impact of Institutions on Cumulative Research”, The American Economic Review 101, 1933-1963. Show less Reply Laurence Busseniers 2 December 2014 A problem with cumulative innovation is the tragedy of anticommons. The tragedy of anticommons refers to the idea that if several individuals own rights of exclusion and exercise those rights, they restrict the access and therefore the use of common resources. This Problem is quite common. Already in 1998, Heller in his book “The Tragedy of the Anticommons: Property in the…Read moreA problem with cumulative innovation is the tragedy of anticommons. The tragedy of anticommons refers to the idea that if several individuals own rights of exclusion and exercise those rights, they restrict the access and therefore the use of common resources. This Problem is quite common. Already in 1998, Heller in his book “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets » targeted this tragedy. As we will see below the anticommon problem is frequent in certain fields such as computer, communication as well as electronics and medical instrument. Those sectors have to innovate in order to stay competitive on their market. The tragedy is so an counterproductive effect that impede firm to innovate as fast (and as cheap) as they want. The main result of the Galasso and Schankerman study is: when no patent protections on an innovation exist, this innovation is 50% more used in subsequent innovations. Based on this fact, we can claim that patents on average do not encourage innovation if we consider cumulative innovations. We can see the impact of invalidation patent on cumulative innovation explained by Galasso and Schankerman to several details. Firstly, the publicity effect of the court’s decision (Although, this effect appears after two years and depend on the press coverage of each specific court decision). Secondly, the impact is heterogeneous. Patent invalidation has a large and statistically significant impact on cumulative innovation in certain fields such as computers and communication, electronics and medical instrument including biotechnology. But in other sectors such as in chemical, pharmaceutical or mechanical technology fields there is only a small and statistically insignificant effect. If we search further explanations of heterogeneity in the technology fields, where the impact of patent invalidation is strong, we can point two elements. The first element is the complexity of technology. We can understand the complexity of technology as the number of patents reliable to the new product. The second element is the fragmentation of patent ownership among different firms. Indeed it is easier for the firm of a new product to negotiate only with few firms than with plenty of them. This is consistent with the failure in licensing as the source of the obstacle to cumulatively innovate. Thirdly, the relation between the size of a company (and thus the scope of the patent portfolio) and the blocking effect show that the impact is entirely driven by the invalidation of patent in the hands of big firms. In conclusion it’s important to underline the predominance of the environment to explain the blockage effect. The public policy should therefore target these specific environments. Bibliography: http://www.sciencemag.org/content/280/5364/698.full http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation http://icampus.uclouvain.be/claroline/backends/download.php?url=L1JlYWRpbmdzL1RleHRib29rcy9wYXJ0N25ldy5wZGY%3D&cidReset=true&cidReq=LSMS2041 Show less Reply Gwenael Bailly 2 December 2014 If we all know problems that are caused by overuse: pollution, speculation, impoverishment… the problems that underuse brings are quite hard to spot. The last decades bring this new kind of problem with a huge amount of new patents that resulted in cumulativeness, mainly in sectors like biotech and new technologies. This cumulativeness can be divided in two different types: sequential…Read moreIf we all know problems that are caused by overuse: pollution, speculation, impoverishment… the problems that underuse brings are quite hard to spot. The last decades bring this new kind of problem with a huge amount of new patents that resulted in cumulativeness, mainly in sectors like biotech and new technologies. This cumulativeness can be divided in two different types: sequential and complementary innovations. The first one is not a big deal here since it describes the fact that one innovation leads to second-generation innovations so there is only one patent used by new products. On the other hand, complementary innovations describes the fact that a second-generation innovation requires some first-generation innovation , so there are more than one patent involved in the development of a new product. This kind of cumulativeness brings new kinds of problems: it gives the patentee of the first-generation’s product a hold-up right on the second-generation product, and the IP rights allocation to the different right-holders of first-generation concerned induces a higher price of the product of second-generation. This phenomenon is called “the tragedy of the anti-commons: when several individuals own rights of exclusion and exercise those rights, they restrict the access, and therefore the use, of common resources” and we will know discuss about it. Galasso and Schankerman tried to estimate the impact of the pattern rights on cumulative innovation and encountered three empirical difficulties developed in this article. According to us, one point that should be developed to have a better overview of this problem is the evolution of this impact over time. We think that it is important to legislate to restrain the bad consequences of the “tragedy” (for example, restraining innovation) and therefore, having an idea of the evolution of the phenomenon by sector is important. This claim is pretty obvious in a sector like complex technologies: according to the article, 50% of new technologies are not patented because of a previous patent; it represents a huge loss of knowledge. The same problem occurs in the biotech sector, “the battle, due to so many patents, raises the argument that ―the proliferation of weak patents can be a strong drag on innovation”. As it is said by Michael Heller: “Innovation has moved on, but we’re stuck with old-style ownership that’s easy to fragment and hard to put together.” We strongly agree with his thought and we are convinced that the actual patenting system is slowly coming to an end because it is encountering more and more failures. Sources:  http://www.ipdigit.eu/2014/10/a-primer-on-cumulative-innovations/  http://wealthofthecommons.org/essay/tragedy-anticommons  http://www.ipwi.uj.edu.pl/pliki/prace/The%20Tragedy%20of%20the%20Anticommons%20in%20Biotechnology_1316697088.pdf Show less Reply Chloé Jacquemin 1 December 2014 Complementary innovation is a type of cumulative innovation, in which the second-generation of the innovation is the combination of several different first generation innovations. The main problem for complementary innovation is the “tragedy of anticommons”, which is “the underuse of a resource when multiple owners all have a right to exclude others from a scarce resource and that no one…Read moreComplementary innovation is a type of cumulative innovation, in which the second-generation of the innovation is the combination of several different first generation innovations. The main problem for complementary innovation is the “tragedy of anticommons”, which is “the underuse of a resource when multiple owners all have a right to exclude others from a scarce resource and that no one has an effective privilege of use”. (Heller and Eisenberg, 1998). This short comment aims at investigating arguments regarding the effects that patents have on cumulative innovations. I will consider three empirical studies in different sectors and a comparison between copyrights and patents system. Galasso and Schankerman (2013) found in a recent study that patents are more likely to block follow-on innovation in markets, where new products rely on a considerable number of patentable elements and in which there is a high fragmentation of patent ownership among diverse firms. The semi-conductor industry is an example of this type of market. Indeed, semi-conductor firms are engaged in complex cumulative innovations and the sector is characterized by rapid technological changes, costly and depreciating investments and the use of a “thicket” of innovation of others. In an empirical study (Hall and Ziedonis, 2000), the authors studied a shift towards stronger patent rights in US legal environment in the early 1980s by interviewing 100 US semiconductor firms during the period after the shift. They looked at how the shift affected innovative activities of firms in this context and the results suggest that the strengthening of patents’ right increase the risk that the holder of the right can block another from using the technology patented. They also reached the conclusion that the legal shift increases patent portfolio races owned by firms due to the fact that firms want to leverage their power in negotiations and to trade the rights to infringe patents with the help of their patents portfolio. The same results can be applied to other complex industries such as computers or electrical equipments. The second empirical study collected data on the sequencing of the human genome from public Human Genome Project and from the private firm Celera in order to investigate if intellectual property rights on existing technologies hinder subsequent innovations (Williams, 2010). The author found evidence that Celera’s intellectual property rights led to reductions in subsequent scientific research and product developments on the order of 20 to 30 percent, which suggests that Celera’s IP had more negative effects on second generation innovation than if Celera’s genes had been in the public domain. In the third study, which empirically tests the anti-commons hypothesis (Murray and Stern, 2005), they looked at the dual characteristic of knowledge: it can be both used in a scientific research article or in commercial applications as patent. They studied patent-papers pairs and lead to the conclusion that the granting of intellectual property rights is associated with a significant but modest decline in the knowledge accumulation measured by forward citations. IP may restrict the diffusion of scientific research and the ability of future researchers to “stand on the shoulders of giants”. Finally, to look at the effect that patent rights have on cumulative innovation, some authors compared the copyright system with the patent system (Bechtold, Buccafusco and Sprigman). While copyright law offers little protection to follow-on innovators, patent system allocates them some property rights. They reached to the conclusion that the copyright regime leads to decreased incentives for follow-on innovation. However, the patent regime may increase follow-on innovation in the first place, which may create hold-up situations once licensing negotiations start. To conclude, through these different examples, I saw that these patents can lead to an underuse of the resource and especially in specific industry sectors. As a consequence, authorities have to be aware of this problem and design policies that facilitate licensing to promote cumulative innovation without diluting the innovation incentives that patent rights provide. (Galasso and Schankerman, 2013). References BECHTOLD, S., BUCCAFUSCO, C., SPRIGMAN, C., “Play First versus Pay First: Exploring Cumulative Innovation in Patent & Copyright Law” HALL, B., ZIEDONIS, H., (2000), “The Patent Paradox Revisited: An Empirical Study of Patenting in the US Semiconductor Industry, 1979-95” in Rand Journal of Economics, vol. 32:1, pp. 101-128. HELLER, A., EISENBERG, S., (1998), “Can patents deter innovation? The anticommons in biomedical research”, in Science, vol. 280, pp. 698 – 701. GALASSO, A., SCHANKERMAN, M., (2013), “Patents and cumulative innovation: causal evidence from the courts”, CEPR Discussion Paper 9458. MURRAY, F., STERN, S., (2005), “Do formal intellectual property rights hinder the free flow of scientific knowledge? An empirical test of the anti-commons hypothesis”, NBER working paper series SHAPIRO, C., (2001), “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting”, in Innovation Policy and the Economy, vol. 1, pp 119-150. WILLIAMS, H., (2010), “Intellectual property rights and innovation: evidence from the human genome”, NBER Working paper series. Show less Reply Stroobants Benoit 1 December 2014 It’s seems obvious that Innovation takes more and more space in our life and in our entire society. Researchers and scientists are constantly developing their talents to address the needs of their clients, applying their energy and skills to complex problems and trying to find solutions that are truly helpful. Actually, most of discoveries come from past inventions that have…Read moreIt’s seems obvious that Innovation takes more and more space in our life and in our entire society. Researchers and scientists are constantly developing their talents to address the needs of their clients, applying their energy and skills to complex problems and trying to find solutions that are truly helpful. Actually, most of discoveries come from past inventions that have been updated due to obsolescence or sometimes from new ones that are using past researches and trying to improve it further. From the light of the article we’ve just read, it seems that the question of cumulative innovation is still in discussion; trying to know what kind of impacts it could have on the economy. Indeed cumulative innovation, that is the common way to enter the market at this time, surrounded by the growing patent race that companies are facing, do sometimes worst than we had expected. When the completion of your work requires patents to be completed, you stand in a weak position regarding patent providers who have a monopoly position in this situation. As a monopoly, you would better to take advantage of this strong position by selling only few rights at expensive costs. Then you would be a drag for cumulative innovation rather than an incentive for it; letting economics get worse. Besides this, the influence of patent rights could impact on cumulative innovation in another way. In fact, if firms can’t reach their goals because of these patent rights, they could look further on their previous researches to find a better way to achieve the same objectives or even better ones. By this way, several companies that went under the pressure of these patent rights could develop new technologies that could be patented to become an upstream firm and release the accumulated pressure. As far as I am concerned, I think patent rights will always be part of a huge debate where everyone will always have conflicting views. The most important thing is to be able to collect the pros and cons of each opinion in order to decide what’s really important for the future of our society and its global welfare. Show less Reply Brodheim Dimitri 1 December 2014 Nowadays, to progress, firms have to innovate. But it is impossible to innovate in isolation, a firm has to use previous (separates) inventions in order to create value. For instance, Edison didn’t invent the light bulb. Indeed, Sawyer and Man developed a light bulb with a filament and then Edison found a bamboo fiver which worked better. This is what…Read moreNowadays, to progress, firms have to innovate. But it is impossible to innovate in isolation, a firm has to use previous (separates) inventions in order to create value. For instance, Edison didn’t invent the light bulb. Indeed, Sawyer and Man developed a light bulb with a filament and then Edison found a bamboo fiver which worked better. This is what we can call: cumulativeness innovations. There are 2 kinds of them; Sequential innovation (one to all. I.e.; Laster leads to CDs, Laser surgery, Spectroscopy…) and complementary innovations (“all” to one). As I said, nowadays, to progress, firms have to innovate. But it is impossible to innovate in isolation, a firm has to use previous (separates) inventions in order to create value. If you look at the communication sector, the phone sector more specifically, you could see a lot of different GSMs with different software. Now, everyone around you in the street has IOS or Android. Indeed thanks to cumulative innovation, more specifically, complementary innovations, Apple and Samsung have a naturally monopoly on cell phones market. So, nowadays, we are more in a ‘’complementary innovations” situation. But complementary innovations doesn’t let this possibility to each firm. Complementary innovations represent the situation where a number of different first-generation innovation are needed in order to create a second-generation product, to create value. But, prices are higher if they are set by independent patentees rather than jointly (“Royalty-Stacking”) and it may impede innovation. This is called; the tragedy of the “anticommons”. Indeed, after a recent proliferation of intellectual property rights in biomedical research, and in order to counter-argument the “Tragedy of the commons”, which helps explain why people overuse shared resources, a different tragedy is suggested; an “anticommons”, in which a scarce resource is prone to underuse because to many owners each have a right to exclude others and no one has a privilege of use. Exactly the opposite of the tragedy of the commons, in which, according to Garrett Hardin, people often overuse resources they own in common because they have no incentive to conserve. In theory, in a world of costless transaction, people could always avoid commons or anticommons tragedies by trading their rights. But in practice, avoiding tragedy requires overcoming transaction cost. Indeed, in order to innovate, a firm needs to have several patents, owned by separate innovators and because patents are anticommons, the firm need to negotiate a license with each innovator. The problem is that independent pricing leads to suboptimal usage (Royalty-Stacking). Indeed, according to Cournot, it is like “Multiple marginalization” (for producers: if the price of one complement decrease, the demand for others complements will increase (complement + demand increases for the first one) and the solution for the producers is to coordinate decisions in order to make a big united margin). So, independent pricing is the source of the problem and, in order to fight against higher transaction costs, price “collusion” or “cartels” are desirables. This is called Patent pools (i.e; MPEG, Bluetooth, RFID, etc…); Patents are sold in a package to decrease transaction costs, patent litigation, the total price… But patent pools are difficult to form, may entail inequitable remuneration, may shield invalid patents, etc… and the problem may not be solved. In conclusion, nowadays, new products appears faster and faster due to cumulative innovation. By using several first-generation innovations, producers constantly innovate. But to use this several innovations, the firm has to negotiate the license to each innovators which increase a lot the transaction costs (Royalty-staking). Patent pools, by reducing all the costs, are a solution in order to decrease these transaction costs. But they are hard to form and may entail remuneration and so, aren’t sure. This is why I think that the system have to change, in one hand, because patent stimulate innovation and is a source of development. But in other hand because patent rights may impede cumulative innovations due to the insecurity of the existence of patent pools and so the increase of the transaction costs (Royalty-Staking) Sources : http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation http://www.sciencemag.org/content/280/5364/698.full#ref-17 Show less Reply Sebastian Singer 1 December 2014 For an outstanding person an innovation must seem as a single event. But we know that they cannot be seen as an isolated incidence. Many innovations rely on previous ones and some other serve as a foundation for subsequent innovations. According to this dynamical processes, economists align the “tragedy of the anticommons”, which contains the statement about an inefficient underutilization…Read moreFor an outstanding person an innovation must seem as a single event. But we know that they cannot be seen as an isolated incidence. Many innovations rely on previous ones and some other serve as a foundation for subsequent innovations. According to this dynamical processes, economists align the “tragedy of the anticommons”, which contains the statement about an inefficient underutilization of resources (here: patents) due to single profit maximization, which does not results in a socially desirable outcome (here: use of those patents to create sequential innovations). Underlying this problematic, what is the effect of patent rights on cumulative innovations? What could be solutions to ensure a maximum of social welfare? This is I’d like to discuss in the following comment. If we find a market where multiple firms hold several patents, and their right to use the respective underlying innovation is required for another agent to evolve a subsequent innovation, than we will have perfect preconditions to observe the anticommon’s problem. First of all one has to point out, that everybody has a founded interest that there will be a subsequent innovation realized, under the condition that its benefits outweigh its cost for the inventor and for society as a whole. Given that constraint, when the mentioned innovation occurs – Apparently its inventor will benefit from a granted patent and its monopolistic exploitation, also – The prevailing patentee will profit from spillover effects and moreover, – The consumer will face an additional value from a broader product diversity (in case the innovation results in a new product) and once the new patent will fall in the public domain by exploiting it. Additionally, – If the sequential innovation involves a “green impact”, e.g. it replaces a high emission causing technology, then also the environment will benefits from the novelty, and if environment – air, water…, is seen as a public good, the agents, mentioned above, also benefit on top. Back to our example, compared with a situation where the subsequent innovator can get a license for the needed innovation out of a single source – The transaction cost will increase because of more agents. – There will be higher license fees/prices, because, of individual profit maximization and the absence of mass effects. Hereby it has to be said, that this is only the case if the respective required patents are complements. When they show evidence for substitutes it may be the other way round and the fees will decrease in due to competition. Furthermore, – The risk that one of the patent holders may not cooperate will increase. These aspects can finally deter the potential subsequent innovator from using the available resources to provide a socially desirable result even, as shown, if everybody would profit from it, and no one would be harmed – so its implementation would be pareto optimal. Facing this sort of system failure, what can be solutions to tackle the issue? – Vertical integration; tight collaboration and therewith integration of first- and second-generation innovation (might be rather applicable for bigger firms), as we can see from the world’s biggest pharmaceutical and biotechnical company Norvatis and Genomics Institute – Cross-Licensing/ patent pooling; bilateral rights to use the respective innovation of the other – often for a unique fee or even free of charge. Hereby one have to mention critically that patent pooling depicts a strategically alliance, which could be inclined to extend the agreement on the product market – Especially in the software market that exhibits on the one hand a very high degree of innovation power, and on the other hand a weak patent protection (compared to e.g. the physical engineering sectors, in particular in Europe), one can observe, that there exist some mechanisms beyond the patent system, which can explain the mentioned phenomenon. Software companies have the possibility to sell their (new) products as a “closed source” or an “open source” product. The “closed source” software is often offered in return of a license fee, even there is no patent protection. Hereby, one has to stress, that it is principally difficult to copy the respective software only based on the experienced behavior of the product. An example would be Microsoft Office. “Open source” software is characterized by the fact that the company, which provides the product, doesn’t receive fees, and additionally offers the source code, which enables the user to copy and improve the product. In return “Open source” software is often bankrolled by donations and also enhances the awareness and image of the providing company faster than the alternative (e.g. Linux and redhat, Google Chrome and SRWare Iron). In conclusion, innovations are more often a cumulative rather than a “stand-alone” event. Hereby, strong patents can partially be seen as an obstacle for further innovations whereas imitation can be seen as an incentive for innovation within a competitive market. But between a “black or white solution”, there exist a lot of grey shades to find the right patent adjustment. When Galasso and Schankerman point out “that the removal of patent protection leads to about a 50% increase in subsequent citations to the focal patent”, they might blank out the implication that the origin innovation and the incentive to create it is still needed to ensure the cumulative process that innovations exhibit. As the software industry found some ways beyond the usual track to foster innovations that are socially desirable, we also may have to think about different proper patent allocation systems for different branches and markets. Sources: “Die Volkswirtschaft, das Magazin für Wirtschaftspolitik”, “Patente und Innovationen: Ökonomische Überlegungen zu einem komplexen Anreizproblem“ , 7/8 2006, S. 23-25, Prof. Dr. Armin Schmutzler, Universität Zürich (German) http://www.researchoninnovation.org/patentde.pdf (German) http://www.iseg.utl.pt/departamentos/economia/wp/wp0162007desocius.pdf http://www.srware.net/en/software_srware_iron.php http://www.gnf.org/ Show less Reply Yick Tang 30 November 2014 We cannot simply say patent rights facilitate or impede cumulative innovation. As we all know, innovation development depends on new technologies and patent rights are the most important elements for stimulating innovation, namely, patent rights facilitate innovation. Nowadays, new products are created faster and faster because of cumulative innovation. Producers constantly innovate new products by referring prior arts. However, producers…Read moreWe cannot simply say patent rights facilitate or impede cumulative innovation. As we all know, innovation development depends on new technologies and patent rights are the most important elements for stimulating innovation, namely, patent rights facilitate innovation. Nowadays, new products are created faster and faster because of cumulative innovation. Producers constantly innovate new products by referring prior arts. However, producers have to pay a lot for using prior arts due to the fact that prior arts are also under protecting by patent rights. Superficially, parent rights impede cumulative innovation but actually, parent rights prevent low-capacity producers to abuse prior arts. In other words, parent rights decrease similar low-creativity products getting into the market. Unfortunately, big problems would come out, they are monopoly, duopoly and oligopoly such as Apple and Samsung. About a decade ago, there were a lot of different operation system, but now your phone is basically IOS or Android. With innovation cumulating under the effect of patent rights, new technologies in the same industry would more and more concentrative on one or a few of large enterprises. Moreover, telephones are like a kind of necessity which don’t have substitute goods and hence one of them, Apple or Samsung, will certainly have a natural-monopoly on cell phones market. Patents rights can facilitate or impede cumulative innovation but the influence of patent rights relies on the development of intellectual property law. But other than the disadvantages of patent rights, there are two cases about the positive effect of patent rights. One is about Apple, the other is about Microsoft. Every year, Apple launches its new products having a lot of new patents. The latest model can be supposed to be the cumulative innovation of the previous model. This is a kind of improvement. Microsoft is in a similar situation. After a period of time, Microsoft also launches its own new Windows systems. If they didn’t have patent rights to protect their intellectual property, they would never be that successful. To sum up, patent rights are the greatest system for stimulating innovation but it is not perfect. There is still some problems having to solve, such as “Privateer” and “Overprotection”. It’s unimaginable to consider the world without patent rights. No one has interest to create. No new technology is announced. No new medicine is invented. How do we improve the law of patent rights which becomes our new topic of era? Show less Reply Fares Yanis 30 November 2014 The patent system is one of the main instruments governments use to increase research and development incentives, but several researchers in the world of innovation argued that patent rights could be an impediment to foster innovation, specially in cumulative innovations, for instance the tragedy of the anti common is a matter of fact.The tragedy of the anticommons is defined as…Read moreThe patent system is one of the main instruments governments use to increase research and development incentives, but several researchers in the world of innovation argued that patent rights could be an impediment to foster innovation, specially in cumulative innovations, for instance the tragedy of the anti common is a matter of fact.The tragedy of the anticommons is defined as follows : « when multiple owners each have a right to exclude others from a scarce resource and no one has an effective privilege of use .» In practice, avoiding tragedy requires overcoming transaction costs, or as stated by Heller and Eisenberg, 1008 the raising proliferation of patents and the fragmentation of ownership rights between firms are seemed to increase transaction costs, to harm R&D and to « expose firms to ex-post hold up through patent litigation ». As Galasso and Schankerman underlined it : « in extreme case where bargaining failure in patent licensing occurs, follow-on innovation can be blocked entirely. » These dangers have been prominently voiced in public debates on patent policy in the US (National Research Council 2004, Federal Trade Commission 2011) and recent decisions by the Supreme Court (e.g. eBay Inc. v. MercExchange, LLC, 547 US 338, 2006). Similar concerns have also been raised in European policy discussions on the implementation of a unitary European Patent and European Patent Court (European Commission 2011).  In order to design government policies that effectively address this problem, it is important to identify whether their impact differs across technology fields and firms. Huge reforms of the patent system will be required if this blocking effect is upon different technology areas, but otherwise only targeted policies should be formalized if patents appear to block follow on innovation only in very specific environments. In recent research, Galasso and Schankerman have estimated the impact of patents rights on cumulative innovation. The research was established on two fronts. First, they needed to identify comparable technoloiges with and without patent protection. Secondly, follow on innovation was difficult to measure. The impact of patent invalidation on subsequent innovation is highly heterogeneous, in the sense that it has a large and statistically significant impact on cumulative innovations in technological industries – computers and communications, electronics and biotechnology, but it is small and insignificant in chemical, pharmaceutical or mechanical technology. These outcomes can be explained by two sources: complex technology and high fragmentation of patent ownership within several firms. On an article of Berkeley education , if a particular merger, joint venture, or licensing agreement unduly limits the number of competitors in a particular innovation market and yields no offsetting efficiencies in terms of the use of R&D to promote innovation, restrictions may be placed on the transaction  . Furthermore, for example, in the context of a research collaboration between an upstream biotechnology company and a downstream pharmaceutical firm, broad rights my be useful if they give the upstream partner the bargaining power necessary to control the direction of the collaboration  In addition if upstream companies own the rights, these companies probably will not fear that innovational cannibalize existing downstream products. Finally, even if one accepts the argument (and there is good reason to accept it) that multiple research paths are necessary to exploit the full potential of upstream innovation, Kitch’s theory does not foreclose the possibility of different research paths. So the impact of patenting on cumulative innovations will depend on the industry sector, but mainly on the economical interest of companies. Sources :  http://www.sciencemag.org/content/280/5364/698.full#ref-10  http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1326&context=btlj  Gilbert & Sunshine Incorporating Dynamic Efficiency Concerns in Merger analysis, 594-97.  Lerner & Mergers 325-26 Show less Reply Platiau Sylvain 26 November 2014 My opinion is that patent rights impede cummulative innovation in most of cases and do not facilitate this type of innovation in any way. In general in our period I think also that cummulative innovation is the principal innovation and so that maybe patents rights rather than facilitates innovations by making it more profitable makes it slower. Concerning cummulative innovation, the…Read moreMy opinion is that patent rights impede cummulative innovation in most of cases and do not facilitate this type of innovation in any way. In general in our period I think also that cummulative innovation is the principal innovation and so that maybe patents rights rather than facilitates innovations by making it more profitable makes it slower. Concerning cummulative innovation, the most simple fact is that to produce something that requires several patents, we clearly are a downstream firm and patents owners are upstream firms. And in this case (execpt some rare exceptions) your « patents providers » are all monopolists. So I think, like for all other normal goods they have incentive to sell less and at higher prices. In this way, patents clearly impede cumulative innovations. More obvious, the costs of transaction : if I have to pay more to use patents, I also have to pay more to negociate, administrative costs are also higher. And clearly, if these costs are too high, we do not invest in a possible innovation. And more objectionable : if the innovation lost here were important for an other future innovation (and so on), we can say that patents « destroys » innovation like falling dominoes. Show less Reply David Vanraes 26 November 2014 In the context of the presence of anti commons it would be right to say that anti common are more likely to happen in the future because since there are more and more patents, we expect that more and more entities would be excluded from the right of use of a particular product. And we would expect no increase…Read moreIn the context of the presence of anti commons it would be right to say that anti common are more likely to happen in the future because since there are more and more patents, we expect that more and more entities would be excluded from the right of use of a particular product. And we would expect no increase in cumulative innovations. This should be the case if we consider that the level of licensing, pooled patents and restrictions stay at the same level as before. So after all, if there are no measurements that will be taken against it in the future it is likely that tragedies of anti commons will happen more. It is clear that there is bigger need to more efficient licensing to promote cumulative innovation without diluting the innovation incentives that patent rights provide (2013). It is clear that anti commons exist clearly more where institutions are more present and better organised. For example in Europe and in the US anti commons are more likely to happen and finally blocking cumulative innovations. In the other continents like Africa and South-America where institutions are significantly less developed. For example in a country like Somalia there is almost no regulation, patents maybe don’t exists and it is easy to copy inventions without paying any license and therefore theoretically speaking easier to have a cumulative innovation. But at the other hand it is clear that in these countries like Somalia that without any regulation companies doesn’t invest in innovation because of the lack of property regulation. Notions of over and underuse of resources (knowledge) doesn’t even exist. These two opposite cases show therefore clearly that an optimal equilibrium measure of institutions is necessary. And that in case of stronger presence of institutions anti commons are more likely to happen. http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation Show less Reply Marta de Sousa Lucas Caeiro 22 November 2014 Patent regimes usually enhance innovation, as they are seen as incentives for the innovator to recoup the respective R&D investments. Nevertheless, several academics, researchers and policy makers have been arguing that in fact patent rights can be an impediment to foster innovation, specially within cumulative innovations, being formalized in “tragedy of anticommons”. As stated by Heller and Eisenberg, 1998 the…Read morePatent regimes usually enhance innovation, as they are seen as incentives for the innovator to recoup the respective R&D investments. Nevertheless, several academics, researchers and policy makers have been arguing that in fact patent rights can be an impediment to foster innovation, specially within cumulative innovations, being formalized in “tragedy of anticommons”. As stated by Heller and Eisenberg, 1998 the raising proliferation of patents and the fragmentation of ownership rights between firms are seemed to increase transaction costs, to harm R&D and “expose firms to ex-post hold-up through patent litigation”. These concerns have been embraced in public debates in US(National Research Council 2004, Federal Trade Commission 2011) and recent decisions by the Supreme Court (e.g. eBay Inc. v. MercExchange, LLC, 547 US 338, 2006) and in European Union through the implementation of a unitary European Patent and European Patent Court (European Commission 2011). The imminent question of the impact of intellectual properties rights as patents on cumulative innovation is difficult to infer and, thus there is few evidence of that impact. The problem emerges from the difficulty of that impact measurement and of course to identify a good counterfactual, that is what would happen in absence of patent rights in case of cumulative innovations, given that cooperation should play a decisive role. Joshua Gans illustrates clearly that when questioning:” How do you measure an innovation, measure follow-on innovations or applications or, indeed, the quality of all of this? Then you have to find a situation where there was a patent experiment to allow you to examine causality.” Works from Fiona Murray and Scott Stern, Heidi Williams and Alberto Galasso and Mark Schankerman have argued that patent protection (or other IP changes) might deter cumulative innovation upwards of 30%. The empirical research conducted by Galasso and Schankerman (2013-2014) (1) through the patent invalidation decisions by the US Court of Appeal for the Federal Circuit (instrumental variable approach) found that loss of patent protection leads to about a 50% increase in subsequent citations to the focal patent, on average, proving that on average patents impede cumulative innovations. Moreover, the impact of patent invalidation on subsequent innovation is highly heterogeneous, in the sense that it has a large and statistically significant impact on cumulative innovations in technological industries – computers and communications, electronics and biotechnology, but it is small and insignificant in chemical, pharmaceutical or mechanical technology. These outcomes can be explained by two sources: complex technology and high fragmentation of patent ownership within several firms. Also the study conducted by Williams (2) focused on human genome analyses the difference between the human genome project – without property rights and Celera – with intellectual property rights, concluding that Celera IP lead to substantially significant reductions in subsequent research and implicitly on cumulative innovations. Another study on semiconductors industry (3) have shown that this sector is also highly reliant on patent regimes, especially after 80´s, when that propensity had sharply risen. It is then reasonable to argue that patents hindrance cumulative innovations also in this sector, due to the fact that these firms engage in patent races aiming at reducing concerns about being held by external patent owners and at bargaining access to external technologies on more favourable terms. On the other hand, regarding the biotechnology and pharmaceutical companies (4) , they tend to collaborate more, since that pharmaceuticals rely on information based on genetic and proteomic that is provided by biotechnology companies. For example to develop drugs for Alzheimer or single nucleotide poly-morphisms (“SNPs”)pharmaceuticals needs biotechnology ´s firms research. In this sense, patents are not impeding cumulative innovation, because if they exist, they are negotiable or they do not harm innovation. In conclusion, the impact of patenting on cumulative innovations will depend on the industry sector, and also on the economical or strategically interest of firms to cooperate in R&D. Sources: (1). Galasso, Alberto; Schankerman, Mark “ Patents and Cumulative Innovation: causal evidence from the courts”, 2014 (2). Williams, Heidi L. “Intellectual Property Rights and Innovation: evidence from the Human Genome”. (3). Ziedonis, Rosemarie Ham; Hall, Bronwyn H. “The Effects of Strengthening Patent Rights on Firms Engaged in Cumulative Innovation: Insights from the Semiconductor Industry” 2001 (4). Rai, Arti.K “ Fostering Cumulative Innovation in the Biopharmaceutical Industry: the role of patents and antitrust”, 2001 Berkeley Technology Law Journal http://www.voxeu.org/article/do-patent-rights-impede-follow-innovation http://www.digitopoly.org/2014/07/17/do-patents-stifle-cumulative-innovation/ http://writtendescription.blogspot.be/2013/04/galasso-schankerman-do-patents-impede.html http://economistsview.typepad.com/economistsview/2014/07/do-patents-stifle-cumulative-innovation.html Show less Reply Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment You may use simple HTML tags to add links or lists to your comment:<a href="url">link</a> <ul><li>list item 1</li><li>list item2</li></ul> <em>italic</em> <strong>bold</strong>Name * Email * Save my name, email, and website in this browser for the next time I comment. Notify me by email when the comment gets approved.