Protecting Innovation

Appropriability

the degree to which a firm is able to capture the rents from its innovation

determined by how easily or quickly competitors can copy the innovation

some innovations are inherently difficult to copy (tail, socially complex,...)

firms may also attempt to protect innovations through patents, trademarks, copyrights or trade secrets

Patents, Trademarks and Copyrights

Patents

rights granted by the government that excludes others from producing, using, or selling an invention

must be useful novel and not obvious

Types of patents:

Utility patents: protect new and useful processes, machines, manufactured items or combination of materials

Design patents: protect original and ornamental designs for manufactured items

Plant patents: protect distinct new varieties of plants

Patent Laws around the world: Countries have their own law regarding patent protection. Some treaties seek to harmonize these laws

Paris Convention for the Protection of Industrial Property

foreign nationals can apply for the same patent rights in each member country as that country's own citizens

provides right of "priority" - once inventor has applied for protection in one member country, they can (within a certain time period) apply for protection in others and be treated as if they had applied on same date as first application

Patent Cooperation Treaty

Inventor can apply for patent in a single PCT receiving office and reserve right to apply in more than 100 countries for up to 2,5 years. Establishes date of application in all member countries simultaneously. Also makes results of patent process more uniform.

Patent Strategies

inventors can monetize patents by e.g. licensing the tech to others or selling patent right away

sometimes firms seek patents just to limit the options of competitors, or to earn revenues through aggressive patent lawsuits -> patent trolling (e.g. apply target of patent trolls)

firms sometimes buy bundles of patents just to create a "war chest" to defend themselves from lawsuits by offering a credible threat of retaliation

Trademarks and Service Marks

a word, phrase , symbol, design, or other indicator the tis used to distinguish the source of goods from one party from goods from another (e.g. Nike "swoosh" symbol)

Two traits simplify registration of trademarks in multiple countries: Madrid Agreement Concerning the iNternational Registration of Marks and the Madrid Protocol. Countries that adhere to either or both are in Madrid Union (85 members)

rights to trademark are established in legitimate use of mark,; do not require registration

However, marks must be registered before suit can be brought over use of the mark

Registration can also be used to establish international rights over trademark

reproducing the work in copies or phonorecords

preparing derivative work s based on the work

distributing copies or phonorecords for sale, rental, or lease

performing the work publicly

displaying the work publicly

Work that is not fixed in tangible form is not eligible

However, "doctrine of fair use" stipulates that others can typically use copyright material for purposes such as criticism, news reporting, teaching, research, etc.

However, the Berne Union for the protection of literary and artistic property ("Berne Convention") specifies a minimum level of protection for member countries

Berne convention also eliminates differential rights to citizens versus foreign nationals

Trade Secrets: information that belongs to a business that is generally unknown to others

firm can protect proprietary product or process as trade secret without disclosing detailed info the that would be required in patent

click to edit

Rebalbes broad class of assets and activities to be protectable

to qualify:

info must not be generally known or ascertainable

info must offer a distinctive advantage to the firm that is contingent upon its secrecy

Trade secret holder must exercise reasonable measures to protect its secrecy

Effectiveness and Use of protective mechanisms

in some industries , legal protection mechanisms are more effective than others

eg in pharmaceutical patents are powerful; in electronics they might be easily invented around

It is notoriously difficult to protect manufacturing processes and techniques

In some situations, diffusing a technology may be more valuable than protecting it

However, once control is relinquished it is difficult to reclaim

Wholly proprietary vs wholly open systems

wholly proprietary systems may be legally produced or augmented only by their developers

Wholly open system may be freely accessed , augmented and distributed by anyone

many technologies lie somewhere between these extremes

Pros of Protection and of Diffusion

proprietary systems offer greater appropriability

rents can be used to invest in further development, promotion, and distribution

Give the firm control over the evolution of the technology and complements

May accuse more rapid adoption aid produced and promoted by multiple firms

Tech might be improved by other firms (though development poses its own risks)

Factors influencing benefits of protection vs, diffusion

can firm produce tech at sufficient volume or quality levels?

Are complements important? Available? Can they produce themselves?

is there industry opposition against sole source tech?

how important to prevent tech from being altered in ways that fragment it as a standard?

How valuable is architectural control to the firm? Does it have a major stake in complements for the tech?