Jean O. Lanjouw

Innovation and the international diffusion of environmentally responsive technology

Abstract New evidence is presented on environmental innovation and diffusion over the 1970s and 1980s. At a global level, a substantial amount of innovations occurred. In the United States, Japan, and Germany, the share of environmental patents in all patents varied between 0.6 and 3%, and as such was higher than the corresponding share of pollution abatement expenditure in GDP. Japanese environmental innovation rates were consistently high. Certain plausible connections between environmental regulation and innovation also emerge. Across these three countries and over time, innovation responded to pollution abatement expenditure, an indicator of the severity of environmental regulations. Environmental patenting rates in developing countries were also high, reaching 2% in many years in Brazil. Developing country innovators obtained a non-trivial number of patents, most of which appear geared towards adapting imported technologies to local conditions. However, domestic innovation was only one path to new technologies. ‘Imports’ of disembodied environmental technologies (foreign patents registered in developing countries) were substantial. Foreign patents were typically ‘important’ or generic patents; evidence also suggests that such patents protected intellectual property in equipment exported. Developing countries, especially in East Asia, often chose to obtain technologies embodied in pollution abatement equipment.

How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data

Patent counts are very imperfect measures of innovative output. This paper discusses how additional data-the number of years a patent is renewed and the number of countries in which protection for the same invention is sought - can be used to improve on counts in studies which require a measure of the extent of innovation. A simple renewal based weighting scheme is proposed which may remove half of the noise in patent counts as a measure of innovative output. The paper also illustrates how these data can be used to estimate the value of the proprietary rights created by the patent laws. The parameters estimated in this analysis can be used to answer a series of questions related to the value of patents. We illustrate with estimates of how the value of patent protection would vary under alternative legal rules and renewal fees, and with estimates of the international flows of returns from the patent system. Recent progress in the development of databases has increased the potential for this type of analysis.

PROTECTING INTELLECTUAL PROPERTY RIGHTS: ARE SMALL FIRMS HANDICAPPED?

This paper studies the determinants of patent suits and settlements during 1978–99 by linking information from the U.S. patent office, the federal courts, and industry sources. We find that litigation risk is much higher for patents that are owned by individuals and firms with small patent portfolios. Patentees with a large portfolio of patents to trade, or other characteristics that facilitate “cooperative” resolution of disputes, are much less likely to prosecute infringement suits. However, postsuit outcomes do not depend on these characteristics. These findings show that small patentees are at a significant disadvantage in protecting their patent rights because their greater litigation risk is not offset by more rapid resolution of their suits. Our empirical estimates of the heterogeneity in litigation risk can help in developing private patent litigation insurance to mitigate the adverse affects of high enforcement costs.

Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value

Empirical estimates of the private value of patent protection are derived for four technology areas—computers, textiles, combustion engines, and pharmaceuticals—using new patent data for West Germany, 1953–1988. Patentees must pay renewal fees to keep their patents in force as well as legal expenses in order to enforce them. A dynamic stochastic discrete choice model of optimal renewal decisions is developed incorporating both learning and depreciation as well as the potential need to prosecute infringement. The evolution of the distribution of returns over the life of a group of patents is calculated for each technology using a minimum distance simulation estimator. Results indicate that the aggregate value of protection generated per year is on the order of 10% of related R&D expenditure.

The Enforcement of Intellectual Property Rights: A Survey of the Empirical Literature

This paper examines several recent avenues of empirical research into the enforcement of intellectual property rights. To frame these issues, we start with a stylized model of the patent litigation process. The bulk of the paper is devoted to linking the empirical literature on patent litigation to the parameters of this model. The four major areas we consider are (i) how the propensity to litigate patents varies with the expected benefits of litigation, (ii) the ways in which the cost of litigation affects the willingness to enforce patents, (iii) how the cost of enforcing patents changes the private value of patent rights, and (iv) the impact of intellectual property litigation on the innovation process itself.

Tilting the Table? The Use of Preliminary Injunctions

This paper examines the economic role of preliminary injunctions in legal disputes. We present a model in which differences in financing costs drive the use of preliminary injunction and explore the implications of this legal remedy for ex post efficiency and ex ante incentives. Controlling for the nature of the dispute, we examine the relationships between the financial status of litigating parties and whether a preliminary injunction is requested. The empirical analysis uses detailed data compiled for a sample of 252 patent suits and reveals patterns generally consistent with those suggested by the model.

Intellectual Property and the Availability of Pharmaceuticals in Poor Countries

There continues to be widespread criticism of the extension of patent rights on pharmaceuticals in the developing world as required by World Trade Organization membership. This paper examines arguments in favor and against this strengthening of worldwide patent protection. It emphasizes that these new pharmaceutical patents promise benefits and costs that differ with the characteristics of diseases. Some diseases primarily affect poor countries. For these diseases, patents will not be sufficient to attract substantial private investment because purchasing power is low. However, globally available and well-defined patent rights could increase the benefits derived from greater public financing of research on pharmaceutical products for the developing world. For major global diseases the justification for extending patents in poorer countries is less clear. Thus the optimal global framework for pharmaceutical patents might require differentiating the protection given to products in accordance with their extremely different global markets. The paper considers standard intellectual property and regulatory mechanisms that could be used to differentiate protection. All have serious drawbacks. It then describes a new mechanism that would make differentiating protection a more feasible policy option.

Information and the Operation of Markets: Tests Based on a General Equilibrium Model of Land Leasing in India

Abstract This paper develops an estimable general equilibrium model of land leasing to test the extent to which information is commonly held in a village and whether village markets are efficient. Information regarding the relative farming skill of households is found to be widespread, but the assumption of perfectly efficient markets within the village is rejected. These results have ramifications for the estimation of agricultural household models and for our understanding of rural institutions. The model is derived from the primitives of the production technology, the extent of information and the distributions of assets and several household unobservables. Simultaneity and selection issues are dealt with explicitly in a two-stage maximum likelihood estimation procedure using panel data from India.

A Patent Policy Proposal for Global Diseases

recently, in an effort to keep their prices low, many developing countries did not grant patents on new pharmaceutical products. Today, however, most countries have extended their patent laws to include pharmaceutical innovations,and in order to fulfill World Trade Organization membership requirements, the rest will soon follow. Public concern over the price of HIV/AIDS drugs in Africa has focused attention on this new global system and generated a debate between those who support the establishment of strong patent laws to protect pharmaceuticals in developing countries, and those who would weaken them. The choice does not, however, have to be limited to strong versus weak. The worldwide markets for drugs to treat cancer and malaria are very different and the global patent system would be improved by being tailored to these different markets. This policy brief outlines a proposal that would lower the price of pharmaceuticals that treat important global diseases in developing countries, while at the same time allowing patent protection to increase where it is most likely to lead to the creation of new products. The proposal requires no changes in international treaties—only minor changes to U.S. patent law— and would cost very little to implement. Jean Lanjouw

How Good a Map? Putting Small Area Estimation to the Test

The authors examine the performance of small area welfare estimation. The method combines census and survey data to produce spatially disaggregated poverty and inequality estimates. To test the method, they compare predicted welfare indicators for a set of target populations with their true values. They construct target populations using actual data from a census of households in a set of rural Mexican communities. They examine estimates along three criteria: accuracy of confidence intervals, bias, and correlation with true values. The authors find that while point estimates are very stable, the precision of the estimates varies with alternative simulation methods. While the original approach of numerical gradient estimation yields standard errors that seem appropriate, some computationally less-intensive simulation procedures yield confidence intervals that are slightly too narrow. The precision of estimates is shown to diminish markedly if unobserved location effects at the village level are not well captured in underlying consumption models. With well specified models there is only slight evidence of bias, but the authors show that bias increases if underlying models fail to capture latent location effects. Correlations between estimated and true welfare at the local level are highest for mean expenditure and poverty measures and lower for inequality measures.