Nature and role of intellectual property

Lecture outline: •Introduction to the topic•Why are Intellectual Property Rights awarded? •Main types of intellectual property

• Patents• Trade marks• Designs and utility models• Copyright

•Alternatives to IPRs•Questions for discussion

Introduction

• Range of issues can be discussed, including– Historical development – Recent controversies (see Chapter 11 and/or)

• http://www.scienceprogress.org/2009/01/patent-reform-101/• http://www.law.duke.edu/boylesite/ip.htm• http://en.wikipedia.org/wiki/File_sharing• http://www.wto.org/english/tratop_E/TRIPS_e/trips_e.htm

Why are patents awarded?• Incentive to invest in innovation

– Note: invention may occur without monetary incentives (due to human curiosity), but an innovation requires investment

• Patents balance the need to provide incentives with the introduction of market failure (i.e. high prices of non-rival good)– Have patent protection for up to 20 years, then

knowledge/innovation can be exploited by all

Illustrating the role of patents• Figure 2.1 shows a drastic process innovation

– Patent owner now has monopoly (sets high price compared to marginal cost, and restricts quantity)

– BUT, price is lower than previous price (pre-innovation), hence society wants innovation.

– Society would also like lower prices (P=MC), and this happens when patent protection expires (normally after 20 years)

• Note: the above logic applies for all product and process innovation, but easy to illustrate with drastic process innovation

Figure 2.1 A drastic process innovation

Q1

Price (p)Costs

quantity (Q)Q*

P1

P2

D

a b

c d

e f g MC2=AC2

MC1=AC1

MR

P3

Q2

Patents• What can be patented?• How to get a patent?• Dimensions of patent• Markets for patent rights• Who uses patents most?(Above are sub-headings in Chapter 2 and summary of

material can be found there)May also want to illustrate some famous patents and/or

specifics of own country (see below for sources)

Top patentees at US Patent Office and European Patent Office

 

US Patents (grants) 2006   EPO (grants) 2006

IBM 3,621   Phillips 4,425

Samsung 2,451   Samsung 2,355

Canon 2,366   Siemens 2,319

Matsushita 2,229   Matsushita 1,529

Hewlett-Packard 2,099   BASF 1,459

Intel 1,959   LG Electronics 1,214

Sony 1,771   Robert Bosch 1,093

Hitachi 1,732   Sony 1,088

Toshiba 1,672   Nokia 882

Micron 1,610   General Electric 768

Further information on patents

• US: http://www.uspto.gov– http://www.uspto.gov/web/offices/ac/ahrpa/opa/kids/kidevents_press.html

• UK: http://www.ipo.gov.uk– http://www.ipo.gov.uk/types/patent/p-about/p-funandgames/p-map.htm

• European Patent Office: http://www.epo.org/– http://www.epo.org/topics/ip-webguide.html

• World IP Office: http://www.wipo.int• Patent scoreboards (national offices and also

http://bwnt.businessweek.com/interactive_reports/most_innovative/

• There are many on-line resources, including free patent searches (e.g. http://www.patents.com/)

Trademarks• What can be registered?• How is a trademark obtained?• Length, breath and geographical coverage• Markets for trademarks• Who uses trademarks most?(Above are sub-headings in Chapter 2)Further information can be found at national IP office web-

sites. Note also that ‘brands’ are worlds most successful trademarks (see : http://www.interbrand.com/best_global_brands.aspx or

BrandFinance)

Top trademarkers in the US and Europe

         

Mattel 639   Glaxo 154

Deutsche Telekom 429   L’Oreal 138

Novartis 134   Novartis 135

American Int’l AIG) 126   El Corte Ingles 127

Disney Enterprises 120   Barilla G. e R. Fratelli Società per Azioni

115

Proctor and Gamble 117   Bristol-Myers Squibb 106

Mars 101   Proctor and Gamble 105

IGT 96   Viacom International 104

Beautybank 93   Lidl Siftung 87

US Trademarks (registered)

2006   EC trademarks(registered)

2006

Nedboy, Robin 90   Sony 76

Proportion of firms applying for IPRs by sector (large firms in UK,1996-2000)

Sector No. firms in sample

U.K. Trademarks

CommunityTrademarks

U.K. Patents EPO Patents 

1 Agriculture/Mining 67 0.19 0.12 0.21 0.12

2 Manufacturing 640 0.67 0.55 0.40 0.35

3 Utilities 26 0.85 0.62 0.50 0.42

4 Construction 89 0.39 0.22 0.22 0.09

5 Finance 191 0.52 0.26 0.05 0.06

6 Real Estate 112 0.22 0.12 0.03 0.01

7 Wholesale 181 0.52 0.33 0.12 0.07

8 Retail 132 0.75 0.40 0.08 0.05

9 Hotel/Catering 54 0.65 0.35 0.06 0.00

10 Transport/Comm. 115 0.57 0.43 0.10 0.05

11 Bus. Services 259 0.57 0.43 0.08 0.06

12 Other Services 188 0.56 0.37 0.10 0.12

Other IPRs

• Designs and utility models - Section 2.5 discusses these - Next table illustrates use of designs

• Copyright (see section 2.6)– Copyright, and specifically the file sharing issue,

may be a key issue for students– Hence, could be that copyright issues is developed

in separate lecture and/or as an assignment (some readings for students at end of lecture outline)

UK Top Ten IPR Scoreboard 2003UK PATENTS UK TRADEMARKS UK DESIGNS

NEC 

209 GLAXO GROUP 118 ORIENTAL WEAVERS

90

HEWLETT PACKARD 196 UNILEVER 104 TY INC 90

SAMSUNG 

177 NATIONAL LOTTERY

87 MAINETTI 72

SCHLUMBERGER 

172 BRITISH TELECOMS

82 KEEL TOYS 47

IBM 

171 ICI 80 NIKE 44

BAKER HUGHES 

120 WESTWOOD CONSULTING

59 WITHIT 38

ERICSSON 115 EMBRAER AERONAUTICA

58 MAYFAIR BRASSWARE

34

MOTOROLA 113 BOOTS 46 BLACK AND DECKER

33

VISTEON GLOBAL TECH.

112 GLAXOSMITH- KLINE BIO.

42 NOKIA CORP 33

FORD 100 AVON PRODUCTS 40 DEVONSHIRE STATUARY

30

Further questions about IPRs• Is patenting always the best route to protection?

– Secrecy vs. disclosure. Trade secrecy law

• Optimal patent length– Box 2.1 uses some formal analysis. This can be

extended and/or used for maths-based problem. See references in box.

• Alternatives to IPRs?– This is only briefly covered in Ch. 2, but extended in

Ch. 11. Should alert students to this issue. Could use as on-going assignment through course.

Questions for discussion

1. How does intellectual property differ from tangible property, such as a house or a car?

2. Do patents provide socially optimal incentives?3. Why do firms use trademarks?4. Should copyright be made shorter or longer than at

present?5. Why do different industries make use of different

types of rights?6. What factors influence the optimal length of an

intellectual property right?

ReferencesGeneral:Landes, W. M. and R. A. Posner (2003), The economic structure of intellectual property

law, Boston: Belknap/Harvard University Press.HM Treasury (2006), Gowers Review of Intellectual Property, Norwich: The Stationery

Office.Lerner, J. (2002). "150 Years of Patent Protection." American Economic Review 92(2):

221-25.Hall, B. (2007). "Patents and Patent Policy." Oxford Review of Economic Policy 23(4):

568-587.Copyright:Corrigan, R. and Rogers, M. (2005), ‘The economics of copyright’, World Economics:

The Journal of Current Economic Analysis and Policy, 6(3), 53-174.Lessig, L. (2004). Free Culture: How Big Media Uses Technology and the Law to Lock

Down Culture and Control Creativity. London, Penguin Press.Boyle, J. (2003). "The Second Enclosure Movement and the Construction of the Public

Domain " Law and Contemporary Problems 66(Winter-Spring): 33-74.