Patent Innovation Research Articles

Venture Capitalists and the Patenting of Innovations

We model patent‐signaling by informed venture capitalists to incumbent acquirers of developed innovations. We show that, to signal, venture capitalists develop more patents with higher impact than incumbents would. A tightening of patenting requirements by the patent offices, such as an increase in the required inventive step, increases the pool of unprotected early‐stage ideas, which venture capitalists are better at judging than incumbents, and decreases the number and breadth of patented claims needed to separate highly valuable from less valuable innovations. Consequently, such a tightening would make venture capitalists more likely to back entrepreneurs and increase entrepreneurial incentives to innovate.

Foreword

This special issue of the Journal of Industrial Economics (JIE) on ‘Patents, Entrepreneurship and Innovation' began as the brainchild of Professor Mark Schankerman (London School of Economics) in 2010. Mark has been advocate, manager, and intellectual workhorse on this project since its inception. The completed volume of topical and noteworthy pieces included in these pages would not have been possible without his substantial efforts. Few subjects today deserve robust economic analysis more keenly than innovation and entrepreneurship, and few issues spark more vigorous debate than the role that intellectual property rights play in increasing, or impairing, economic performance and social welfare. Innovation and the deployment of new technology drive economic growth, and recent scholarship demonstrates that intangible assets now account for more than half the business outputs in several of the largest industrialized economies. Moreover, economic research shows that young startup companies contribute a large share of employment growth, and are themselves an important determinant of dynamism in capitalist economies. It is no surprise, then, that one of the institutions used by governments to encourage innovation—patents—should receive increased scrutiny in the scholarly community. Is the patent system working to encourage growth, or does it operate to impede it? Are there elements of design, especially in patent offices and enforcing courts, which can be improved to fit better with the technological and social realities of the 21st Century? And how should we understand entry by and competition among modern firms, especially at the technology and product-market level, within our system of patent prosecution and litigation? Are reforms desirable, or even possible? These are the larger set of questions with which this special issue deals. It was a desire to shed more light on these important questions that led the U.S. Patent and Trademark Office (USPTO), a bureau in the Department of Commerce, to become involved in this project, and to support the JIE and Professor Schankerman in pursuing this volume. The process that led to the articles included here began with a widely-distributed call for papers, and a special two-day workshop held in May, 2012, at the Global Intellectual Property Academy at the USPTO headquarters in Alexandria, Virginia. The Honorable David Kappos, Director of the USPTO, made formal comments opening the workshop, after which authors, academic discussants, and government officials took an active part in discussions aimed at contributing to the development of the papers. After revisions, authors were invited to submit to the JIE and undergo the normal vigorous peer review process and editorial assessments. In my (former) role as chief economist at the USPTO, I saw this project as the type of activity that the USPTO ought to support. In this era of declining budgets, and increasing institutional constraints on public entities everywhere, governments cannot lose sight of the need to invest in research, and in developing better theory and evidence on how the institutions meant to support the innovation system and entrepreneurship environment are operating. This is particularly fitting for patent offices, which have in the past too infrequently paid sufficient attention to information and ideas on system design originating from outside their walls. It is for these reasons that efforts like this special issue are necessary to contribute understanding on critical matters of the day—to the scholarly community, the public and policy makers alike. It is with great appreciation of the authors' efforts that I commend this volume to you, and thank both Professor Schankerman and former JIE managing editor, Dr. Pierre Régibeau, as well as the Ewing Marion Kauffman Foundation for their co-sponsorship of the Alexandria workshop.

Analyzing multilingual knowledge innovation in patents

In the process of analyzing knowledge innovation, it is necessary to identify the existing boundaries of knowledge so as to determine whether knowledge is new – outside these boundaries. For a patent to be granted, all aspects of the patent request must be studied to determine the patent innovation. Knowledge innovation for patent requests depends on analyzing current state of the art in multiple languages. Currently the process is usually limited to the languages and search terms the patent seeker knows. The paper describes a model for representing the patent request by a set of concepts related to a multilingual knowledge ontology. The search for patent knowledge is based on Fuzzy Logic Decision Support and allows a multilingual search. The model was analyzed using a twofold approach: a total of 104,296 patents from the United States Patent and Trademark Office were used to analyze the patent extraction process, and patents from the Korean, US, and Chinese patent offices were used in the analysis of the multilingual decision process. The results display high recall and precision and suggest that increasing the number of languages used only has minor effects on the model results.

Identifying the Evolution of Patent Assignees Collaboration Networks: A Case of Chinese Academy of Sciences (CAS)

This paper is a fundamental work of a purpose to identify the correlation between patent assignees collaboration networks and technology innovation activities, which includes R&D collaboration and management, technology transfer and transform, etc. The principal task of this paper is to confirm a series of methods used for identifying the evolution pattern of the patent assignees collaboration networks and make a demonstration of the Chinese Academy of Sciences (CAS), P.R. China. The analysis was carried out at two levels: ego network, in which CAS was taken as one node, and global network, in which all the subinstitutes of CAS were taken as nodes. Analysis focused on applications numbers, growth of collaborators, densification and growth, network diameter and distribution patterns of final collaboration networks. The results shows that CAS patent applications grew rapidly and showed an exponential growth feature, the collaboration networks tended to densify, the diameters of global networks increased constantly with no signal of being stable, increase or decrease in future. The final global network from 1985-2009 had been mapped and the nodes had degrees k followed a power law distribution. the CAS patent assignees collaborations networks had the growth and preferential attachment features, was consistent to the hypothesis that there might be some factors deciding the evolution patterns of the patent assignees collaboration networks. It is a fundamental work to identify the correlation between patent assignees collaboration networks and technology innovation activities.

Patent law and innovation (Nanjing, December 2–4 2012)

On December 2-4, 2012 the Sino-German Institute for Legal Studies and the Konrad-Adenauer- Foundation Shanghai jointly held an international symposium on “Patent Law and Innovation”. The symposium follows a long term tradition of bringing together academics, practitioners and politicians to discuss current issues that have a high impact on society. One such issue is patent law: The government of the People’s Republic of China (“China”) seeks to gradually change its production dominated industry into one driven by innovation. Goods shall not only be made, but also be created in China. Therefore the Chinese government has designed different kinds of incentives to promote research and development: local governments could receive a bonus for the number of patents granted in their territory, corporate income tax could be reduced quite significantly when filing many patents, professors who acquire patents are more likely to win tenure, workers and students enhance their chances to earn a hukou . In conjunction with a low patent fee these measures have created an atmosphere that has actively encouraged patent application, which has in turn led to a sevenfold growth in patent filings at China`s State Intellectual Property Office (SIPO) during the last decade. [...]

Innovation and firm performance in Korea and China: a cross-context test of mainstream theories

We investigate the relationship between innovation and firm performance in two divergent emerging economy contexts: Korea and China. Mainstream innovation theories make disparate claims for how (1) intensity of innovation, (2) scope of innovation and (3) spillovers impact firm performance. Using a comparative institutionalist approach we hypothesise how these relationships apply to firms in Korea and China. Analysis of 897 firm–year data points over a 4-year period provides broad support for our hypotheses. Intensity of innovation (patent intensity) is a strong cross-contextual argument. Scope and spillover arguments appear to be more context-sensitive. Firms with innovation depth in specific technological fields enjoy better performance in Korea, while diversified innovation is more beneficial for firms in China. Spillovers have a stronger impact in Korea than China. The findings underline the importance of incorporating change in institutional context when developing policy and theory relating to firm innovation and performance in emerging economies.

Waiting is the Hardest Part: Why the Supreme Court Should Adopt the Third Circuit's Analysis of Pay-for-Delay Settlement Agreements

In March 2013, the U.S. Supreme Court will hear Federal Trade Commission v. Watson Pharmaceuticals, Inc., giving the Court the opportunity to answer the multibillion-dollar question of whether brand-name pharmaceutical companies violate antitrust laws when they pay generic drug manufacturers to delay entering the drug market. The Supreme Court’s decision in this case could have a significant impact on rising health care costs in this country. The high cost of prescription drugs has put crippling economic pressure on the U.S. health care system. In 2010, forty-eight million Americans sacrificed filling essential drug prescriptions due to cost - often leading to life-threatening consequences and further increased health care expenses. Although many factors contribute to high drug prices, collusive settlements between brand-name pharmaceutical companies and generic drug manufacturers play a major role by presenting a barrier to lowering drug costs. Brand-name pharmaceutical companies have long been settling patent litigation by paying generic manufacturers large sums of money to drop patent lawsuits, thereby delaying generic drugs from entering the market. These settlement arrangements, known as “reverse payments” or “pay-for-delay” agreements, derive from the regulatory framework of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Act. Though Hatch-Waxman’s goal was to increase generic drug competition in the pharmaceutical drug market while still fostering patent innovation, reverse payment settlements largely prevent timely generic drug entrance into the marketplace. As a result, drug prices remain inflated and American healthcare consumers bear the burden. According to the Federal Trade Commission (“FTC”), these anticompetitive agreements, which rose to a record number in 2012, cost consumers $3.5 billion per year. Due to the complex intersection of the regulatory scheme of Hatch-Waxman, antitrust principles, and patent law, circuit courts have reached divergent conclusions on whether reverse payment settlements are anti-competitive. Three circuit courts applied antitrust scrutiny to find that the reverse payments were unreasonable restraints of trade and violated Section 1 of the Sherman Act. Conversely, three circuit courts reasoned that a reverse payment was legal so long as it remained within the “scope of the patent.” In fact, last year, the Third Circuit reviewed the same settlement agreement as the Eleventh Circuit did in 2005 and yet reached an opposite conclusion. While the Eleventh Circuit applied the scope of the patent test to find that the payments were legal, the Third Circuit expressly rejected the scope of the patent test and found that the payments constituted prima facie evidence of an antitrust violation. Beyond settling the differences in opinion among the lower courts, the U.S. Supreme Court decision will have significant implications for the pharmaceutical industry and American consumers. This Comment contains four Parts. Part I of this Comment provides background information regarding the reverse payment settlement problem, including Congress’s intent for passing the Hatch-Waxman Act, the Act’s basic mechanisms, principles of antitrust and patent law, and the first two cases to deal with reverse payments stemming from the Act. Next, Part II discusses how the Eleventh Circuit, Second Circuit, and Federal Circuit applied the scope of the patent test to reverse payment settlement agreements, and how the Third Circuit rejected the test. Part III then analyzes these circuit court decisions, reasoning that the Third Circuit properly considered reverse payments as prima facie evidence of an unreasonable restraint of trade. Finally, Part IV proposes that the Supreme Court should adopt the Third Circuit’s reasoning and considering additional factors regarding the reasonableness of reverse payments.

Combative patenting: Military entrepreneurship in First World War telecommunications

This paper examines how British patent rights for invention were affected by the vicissitudes of warfare looking especially at new communications technologies from the Crimean War up to the aftermath of the Great War. We can thus see longer-term continuities in the complexities of patenting innovations for military usage that avoid exceptionalist references to the pathologies of the “Chemists’ War.” I investigate how civilian and military inventors responded to the opportunities and constraints of military combat to assert personal rights against the claims of the state. Three case studies reveal contrasting facets of the complex relationship between inventor and state that cannot simply be captured by reference to the putative “property rights of invention.” Looking at service inventors of field telephones and the telegraphic Fullerphone and comparing their strategies with Marconi and Lodge’s use of patent royalties for post-war corporate expansion, reveals how far patent rights were matters of negotiation over the social contract of patenting, not simply about property rights of either state or inventor. The category of intellectual property rights for invention is thus historicized to show how the social contract underpinning the UK’s patent system could either be over-ridden by the state’s wartime management of innovation or subverted and/or appropriated for the ends of inventors.

Analysis of Environmental Patents in Japan from 1964 to 2008

Innovation is a key factor for achieving economic development and environmental preservation. This study examines the characteristics of environmentally innovative patents and clarifies the differences in patent data trends before and after big events and environmental policy changes. Our research target is the Japanese manufacturing sector from 1964 to 2008. Our major findings are (1) innovation was strongly triggered in pollution abatement by regulations and in product design by global standardization and market conditions, (2) product innovation becomes increasingly important for environmental management, and (3) policy needs to shift emphasis to promote product innovation in the life cycle process with an integrated perspective.

The International Legal Framework for the Protection of Utility Models

In recent years, the protection of utility models is attracting renewed attention by policy makers in developing countries and on the international level. At the core is often the question whether utility models (also called petty - or innovation patents, etc) can serve as a tool to facilitate minor and incremental technological innovation, especially by small and Medium Enterprises (SMEs). This paper does not attempt in any way to answer this question. It however purports to analyze the flexibilities the international IP system leaves for states to design a system of utility models. This sets out the framework within which countries can operate. Given that utility model protection is one of the few internationally recognized, but hardly regulated areas of IP protection, examining the international framework opens the eyes for a fresh look at the wide range of options on the table when dealing with minor technological innovation.

Получение несимметричных дисульфидов на базе метилтиола – пример использования нано-структуры элементной серы

The methods of obtaining of asymmetric organic disulfides on the basis of metylthiol and nanostructures of element sulfur are discussed. The way of preparation of metyletyldisulfide with the release of 99 % was protected by the innovative patent of RK.

Nanotechnology Enabled Drug Delivery Systems for Bone and Cartilage Regeneration

Current advancement in nanotechnology created novel solutions to improve drug delivery and enhance the efficacy of therapeutics for tissue regeneration and disease treatment. Nanomaterials can be designed and fabricated to have biomimetic characteristics and unique properties for controlling cellular functions (e.g. cell adhesion and stem cell differentiation) and delivering therapeutics more effectively. Different nanomaterials, including nanoparticles, nanofibers, nanospheres, and nanocomposites, are highlighted with key examples of in vitro and in vivo work. Specifically for bone regeneration, the use of nano-phase hydroxyapatite has received increased interest as it is naturally present in bone and has osteoinductive properties. Additionally, the use of nanotubes and nanofibers loaded with chondroprotective agents are utilized for cartilage regeneration. In addition to scaffold design, the use of different drugs (e.g. antibiotics, peptides, proteins, and growth factors) and their delivery rate are discussed. This review focuses on nanotechnology enabled innovative patents for targeted drug delivery to specific tissues (i.e. bone and cartilage) and prolonged multi-phase drug release. Keywords: Nanomaterials, nanotechnology, drug delivery, bone, cartilage, tissue regeneration

Intellectual Property in the Cathedral

Dan L. Burk* Intellectual Property in the Cathedral** A variety of commentators have called for the increased application of liability rules, includ- ing compulsory licenses, to intellectual property. Such arguments are well taken, but unfor- tunately stop short of advocating the full range of potential intellectual property entitle- ment allocations. Property theory offers a range of allocative structures, including reverse liability rules and “put”-type entitlements that could be beneficially applied to intellectual property. This article describes several such rules and argues for their consideration in the canon of intellectual property entitlements. Introduction In this article I propose to explore a number of ramifications of the entitlement structure chosen for intellectual property. Reto Hiltyl, echoing theoretical work by ferry Reichmanz and others, has called for greater use of the compulsory license in intellectual property systems, a call with which I concur. Indeed, my only point of disagreement will be that this call is not enough. My argument will be that liability rules such as the compulsory license are indeed appropriate in many more instances than we have tended to employ them, but that even this rec- ognition is too timid. Property theory provides us with a range of possible entitle- ment constructions, including the classic property rule and liability rule, but by no means limited to these. I will suggest that not only liability rules, but several other kinds of related allocation rules, ought to be more routinely used in intel- lectual property cases than they have been. While many of my examples will be drawn from common law remedies, the structure is equally applicable to incor- poration within civil codes, and as I will suggest, administrative process as well. * Chancellor's Professor of Law, University of California, Irvine. I thank Reto Hilty, Dana Beld- iman, and participants in the Bucerius Law School conference on “Access Challenges in the 21*‘ Century” for their comments on a previous version of these ideas. ** Copyright 2012 by Dan L. Burk. Excerpted from ACCESS CHALLENGES IN THE 215' CENTURY (Dana Beldiman et al. eds., forthcoming 2013). 1 See, e.g., Reto Hilty, Licensing for Innovation, Competition, and Creation in INTELLECTUAL PRO- PERTY AND INNOVATION: A FRAMEWORK FoR 215‘ CENTURY GROWTH 48 (Ian Hargreaves 81 Paul I-lofheinz, eds., 2012). 2 See, e.g., Jerome H. Reichman, Of Green Tulips and Legal Kudzu: Repackaging Rights in Sub- patentable Innovation, 53 VAND. L. REV. 1743 (2000). ZGEIIPJ 4 (2012), 405-418 ISSN 1867-237X © 2012 Mohr Siebeck

The Implications of Incumbent Intellectual Property Strategies for Open Source Software Success and Commercialization

This dissertation investigates how IPR enforcement by proprietary incumbents influences open source software (OSS) adoption and production. It suggests user interest and developer activity on OSS are negatively affected by IPR enforcement particularly for OSS projects technologically overlap with litigated OSS and business projects specific to a litigated OSS platform. Second, it examines how royalty-free patent pools contributed by incumbents affect OSS product entry. It finds the pools related to a software segment will facilitate OSS start-up entry into the same segment; this marginal effect is especially large in segments with high cumulativeness of innovation or high patent ownership concentration.

Protection of Traditional Knowledge in India by Patent: Legal Aspect

Protections of the Traditional Knowledge of the local and indigenous communities seem to be one of the most contentious and complicated issue. The historical development of the protection of intellectual property in the wake of individual private property rights, pushed, the traditional knowledge and the innovative practice based on the it outside the purview of the formal intellectual property protection regime. The need to protect the traditional knowledge captured the attention of the international community only recently but the standard setting was left to the national governments.India an abundant knowledge about the traditional value of various forest products.Natural populations of around 12% of the 6000 species of potentially medicinal plants are currently estimated to be under threat due to degradation and loss of habitats alongside unsustainable ways of harvesting and lack of cultivation. Various suggestions have been advanced in India to extend protection to knowledge, innovations and practices. These include: 1. Documentation of TK; 2. Registration and innovation patent system; and 3. Development of a sui generis system. It is sometimes believed that proper documentation of associated TK could help in checking bio-piracy. Documentation could be a double-edged sword. It is assumed that if the material/ knowledge are documented, it can be made available to patent examiners the world over so that prior art in the case of inventions based on such materials/knowledge are/is readily available to them.

Do firms with larger patent portfolios create more new plant varieties in the US agricultural biotechnology industry?

This article is an empirical analysis of the relationship between patent ownership and variety innovation for US agricultural biotechnology firms in the years 1976–1999. Counts of new varieties include corn, soybean, or wheat varieties protected by either patents or plant variety protection certificates, while patent portfolio size is defined as the count of a firm's gene and method patents. Negative binomial regression results indicate that firms with larger patent portfolios did not exhibit scale economies in variety creation nor did firms with wider technological diversity in their patent portfolios create significantly greater numbers of new varieties. However, firms experienced positive spillover effects from rival firms’ patent ownership, and patent ownership increases this effect. Sample firms that have merged in the past do not produce significantly greater numbers of new varieties after considering an increase in portfolio size and did not experience greater economies of scale in creating new varieties compared with firms that experienced no past mergers.

The private and social value of patents in discrete and cumulative innovation

This article analyzes the relationship between private and social value of patents, comparing discrete and cumulative innovation. Indicators of the social value of patents are known to be less correlated with measures of private value in technological fields where innovation is more cumulative. We test whether this is because the link between private and social value is weaker, or because the indicators are less informative of the underlying concepts of value. Furthermore we analyze whether these differences between technological fields are really due to cumulativeness. We observe cumulative innovation by making use of databases of patents declared essential for technological standards. Using factor analysis and a set of patent quality indicators, we test the relevance of social value for predicting the private value of a patent measured by renewal and litigation. Whereas we establish a robust and significant link for discrete technologies; neither common factors nor any indicator of social value allows predicting the private value of essential, very cumulative patents. Nevertheless, this result cannot be generalized to whole technological classes identified as complex by the literature.

Appropriate intellectual property protection and economic growth in countries at different levels of development

This paper examines how the role of patents and utility models in innovation and economic growth varies by level of economic development. Using a panel dataset of over 70 countries, we find that patent protection is an important determinant of innovation and that patentable innovations contribute to economic growth in developed countries, but not in developing. Instead, in developing economies, a minor form of intellectual property rights (IPRs) – namely utility models – is conducive to innovation and growth, controlling for other factors. Using Korean firm level data as a case study, we find that utility model innovations contribute to firm performance when firms are technologically lagging and that those minor innovations can be a learning device and thus a stepping stone for developing more patentable inventions later on. Upon reaching higher levels of technological capabilities, firms become more reliant upon patents and less on utility models. Thus the lesson here is that patent protection enhances innovation and economic growth in countries where the capacity to conduct innovative research exists. Where this capacity is weaker, a system that provides incentives to conduct minor, incremental inventions is more conducive to growth. The significance of this paper is to emphasize the importance not just of the strength of IPRs but of the appropriate type of IPRs for economic development.

Probabilistic Heterogeneous Patent Protection and Innovation Incentives

Abstract Using a general equilibrium framework, this paper shows that imperfect and heterogeneous patent protection across industries affects the relative innovation incentives of firms and the skill premium. It is found that tighter patent enforcement in some industries allows a patent enforcement externality effect to emerge, whereby varieties with relatively softer patent protection have relatively stronger innovation incentives. The theoretical mechanisms hold for a wide range of the elasticity of substitution between varieties and also hold in a North-South framework when IPR harmonization is considered. A numerical simulation shows that merging both endogenous technological change and institutional aspects in the form of imperfect and heterogeneous IPR protection can contribute to explaining the different innovation and wage inequality performances of the U.S. and the EU regions.

기업의 혁신 활동이 기업성과에 미치는 영향

This study empirically investigates applicable possibility of open technology innovation with which the government is concerned, by figuring out the relationship between firms` innovation behaviors and innovation outputs and their utilization of information network. Empirical methodology was employed as logit regression to explain firms` innovation behaviors and the data set includes more than 2500 firms in the manufacturing sectors. First, empirical findings showed that firms` innovation competencies and behaviors can be explained as the trend of patent application, sales and innovation outputs significantly. The patents of small and medium-sized businesses are inclined to be positive to information sources of university and government-supported research institute and the sales increased when they had labs to concentrate on R&D. On the other hand, the existence of labor union turn out to be negative to their sales. Second, the types of information network which firms utilize turned out to be connected with their innovation behaviors and purposes. Third, four types of innovation, i.e., product, process, organization, and marketing innovation was employed and innovation behaviors and outputs are well connected.