funda13 Flashcards
(9 cards)
What are the key components of the optimal design of a patent, and how do they influence innovation?
Patent Length: Refers to the duration for which an inventor enjoys exclusive rights to their invention.
Incentive to Innovate: Longer patents provide more time for recovery of investment and profit.
Price Distortion: Longer patents create monopolies, leading to potential price distortions in the market.
Patent Breadth (Patent Scope): Determines how broad or narrow the protection is for the invention.
Effect on Competition: A broader patent scope protects against similar innovations but may stifle incremental innovation.
Determined by Law and Courts: Patent length is set by law, while breadth is defined by patent examiners and courts.
How do patents facilitate the trade and licensing of technology?
Codification of Knowledge: Strong patents encourage the inventor to make knowledge public and codify it, as only codified knowledge can be protected.
Reduced Transaction Costs: Patents simplify technology trade by clarifying ownership and rights.
Importance for Small Firms: Patents allow small firms or startups to gain competitive advantage and secure investments by licensing their innovations.
Why are patents especially important for small firms and startups?
Access to Larger Scale Benefits: Patents allow small firms with limited capabilities to benefit from the wider exploitation of their technology.
Licensing Opportunities: Patents open doors to licensing agreements, collaborations, and attracting investment, crucial for firms like biotech startups that lack resources to scale independently.
Market Positioning: With patents, small firms can compete in markets by establishing property rights over their innovations.
What types of uncertainty exist when a firm applies for a patent?
Patent Grant Uncertainty: Uncertainty about whether a patent will be granted at all.
○Patent Scope Uncertainty: Uncertainty about the breadth and enforceability of the patent claims. This includes uncertainty about how easy it is for competitors to “invent around” the patent.
○Patent Pendency Uncertainty: Uncertainty regarding the length of time it will take for the patent to be granted. This delay can vary significantly and is hard to predict.
○Patent Enforcement Uncertainty: Uncertainty about the ability to enforce patent claims through the legal system.
○Uncertainty Over Market Value: Uncertainty about the economic and strategic value of the patent. This value depends on market outcomes and is subject to disagreement
Why is the patent grant date (or more accurately, the patent allowance date) important for licensing?
The patent allowance date is when the USPTO sends a Notice of Patent Allowance, specifying the claims that will be granted. This is the key moment when uncertainty about the scope of IP rights is significantly reduced.
○Prior to this date, the licensor may be hesitant to share complementary, unprotected knowledge due to the risk of expropriation. The uncertainty of the patent scope increases the cost of negotiating a license.
○The patent allowance reduces information asymmetry between the licensor and potential licensees because the licensor has more knowledge about the interactions with the examiner and the likely patent scope.
○Having a well-defined patent right is crucial for the trade of technology
What is the value of a patent, and how is it measured?
The value of a patent is the incremental economic benefit that the patent holder gains from the legal right to exclude others from exploiting the invention. It is measured beyond what would be earned if the invention were not granted a patent. The patent premium is often used to measure this, which refers to the difference in value between patented and unpatented inventions.
How is the value of a patent related to its renewal process?
Patents last for 20 years but must be renewed periodically (e.g., in the US after 3.5 and 7.5 years). The value of a patent is determined by comparing the cost of renewal with its expected future benefit. If the expected benefit exceeds the renewal fee, the patent is renewed. However, firms may sometimes renew patents out of inertia, seeking protection even if the economic benefit is no longer substantial.
What characteristics of a patent help estimate its value?
Forward citations: Later patents referencing the patent, indicating its relevance and impact.
Backward citations: References to earlier patents, showing its relationship to existing technologies.
Number of claims: The scope of the patent’s protection.
Family size: The number of regions or countries where the patent is filed.
Number of offices: The geographical spread of the patent’s protection.
Patents with more citations and broader protection tend to have higher value.
