Mark Schankerman

Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period

This paper examines the distribution of the values of patent rights in the United Kingdom, France, and Germany during the post-1950 period. These values are inferred from the behavior of patentees with respect to payment of renewal fees on their patents. A simple economic model of renewal decisions is combined with data on the proportion of patents renewed at alternative ages and the renewal fee schedules to produce estimates of the distribution (and the total) value of patent rights in these countries. Moreover, the data indicate that there have been changes in the value distribution, and we follow these changes over the period. The empirical results of particular interest concern: the total value of patent rights and the relationship between changes in it and changes in the quantity of patents, the skew in the distribution of patent values, and the rate of obsolescence on the returns to patents.

How Valuable is Patent Protection? Estimates by Technology Field

I present evidence on the private value of patent rights in France for different technology fields and nationalities of ownership, using nonparametric techniques and a parametric model of patent renewal. I find that the distribution of the value of patent rights is highly skewed, that patent protection is a significant but not the major source of private returns to R&D, and that these characteristics vary across technology fields. I compute the R&D cash subsidy that is equivalent to the value of patent rights, measure the variations in value of time, technology fields, and nationalities, and show that these differences are correlated with patent grant rates.

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.

Dynamics of R & D and Investment in the Scientific Sector

This paper empirically explores the dynamic interactions among research and development, capital investment, and the stock market performance of 191 firms in science-based industries during the period 1973-81. Using a framework based on dynamic factor analysis, we test asymmetric specifications of the dynamics between R & D and investment. The data indicate that R & D Granger-causes investment but that investment does not Granger-cause R & D. We discuss interpretations of this causal ordering, characterize the stylized facts of the movements over time of R & D and investment, and measure the stock market valuation of these movements.

Patent renewals and R&D incentives

In a model with moral hazard and assymmetric information, we show that it can be welfare-improving to differentiate patent lives when firms have different R&D productivities. A uniform patent life provides excessive R&D incentive to low-productivity firms, and too little to high ones. The optimally differentiated patent scheme can be implemented through a menu of patent lives (or renewals) and associated fees. We characterize the optimal mechanism, and use simulation analysis to compare it with existing patent renewal systems and to illustrate the potential welfare gains from the optimal policy.

Intervention, corruption and capture: the nexus between enterprises and the state

We study the nexus between enterprises and the state in transition countries, using new enterprise survey data. We examine the quality of governance, state intervention in enterprise decision-making, state benefits to firms, and corruption payments. The quality of governance varies both across countries and across different dimensions of governance within countries. Economic reform improves governance in countries with a low degree of ‘state capture’ by vested interests, but not in high-capture countries. Despite reform, state intervention in firm decisions continues, but it varies substantially across firms. At the micro level (within a country), there is clear substitution between the degree of state intervention, state benefits to firms, and corruption payments, which is consistent with a bargaining model of politicians and firms. But at the macro level (across countries) these elements are complementary, suggesting that politicians, perhaps under pressure from captor firms, have some control over the scope of regulation and intervention.

Damages and injunctions in protecting intellectual property

We investigate how liability rules and property rules protect intellectual property. Infringement might not be deterred under any of the enforcement regimes available. However, counterintuitively, a credible threat of infringement can actually benefit the patentholder. We compare the two doctrines of damages, lost profit (lost royalty) and unjust enrichment, and argue that unjust enrichment protects the patentholder better than lost royalty in the case of proprietary research tools. Both can be superior to a property rule, depending on how much delay is permitted before infringement is enjoined. For other proprietary products (end-user products, cost-reducing innovations), these conclusions can be reversed.

A test of static equilibrium models and rates of return to quasi-fixed factors, with an application to the Bell system

Abstract The paper provides a statistical test to assess the adequacy of the static equilibrium framework which can be used prior to specifying a fully dynamic equilibrium model. We develop and apply this test to the production structure and factor demand equations based on the theory of restricted cost functions. This diagnostic test can also be used in other areas of applied economics, such as consumer demand and labor supply studies, where the analyst faces the choice between static and dynamic models of economic behavior. The framework is used to calculate rates of return to quasi-fixed factors, to measure the extent of over- and underinvestment in such factors, to adjust measured productivity growth for departures from static equilibrium, and to provide measures of marginal Tobins q for individual assets that could be used to model investment functions for those assets.

Competition, entry, and the social returns to infrastructure in transition economies

This paper presents a simple model for analysing the contribution of investments in physical and institutional infrastructure to the transition process. In addition to the direct cost savings, infrastructure investment generates important indirect effects, or transition impacts. The model shows that, by reducing transaction costs, infrastructure intensifies product market competition. This leads to more effective weeding out of the existing high-cost firms in the market. In this model, infrastructure also increases the incentives for low-cost firms to restructure which generates additional efficiency gains, but exacerbates the existing cost asymmetry in the economy. Finally, infrastructure investment enhances the incentives for relatively low-cost firms to enter the market, and thus improves the efficiency of the entry process. The importance of these transition impacts of infrastructure depends on features of the economy, such as the degree of cost asymmetry among firms, the proportion of high-cost firms, the cost of restructuring, and entry costs for new firms.

University Knowledge Transfer: Private Ownership, Incentives, and Local Development Objectives

We study the impact of private ownership, incentive pay, and local development objectives on university licensing performance. We develop and test a simple contracting model of technology‐licensing offices using new survey information together with panel data on U.S. universities for 1995–99. We find that private universities are much more likely to adopt incentive pay than public ones but that ownership does not affect licensing performance conditional on the use of incentive pay. Adopting incentive pay is associated with about 30–40 percent more income per license. Universities with strong local development objectives generate about 30 percent less income per license but are more likely to license to local (in‐state) start‐up companies. In addition, we show that government constraints on university licensing activity are costly in terms of forgone license income and the creation of start‐up companies. These results are robust to controls for observed and unobserved heterogeneity.