Lecture 7: Protecting Innovation Flashcards
What is the term “Appropriability”
= the degree to which a firm is able to capture the gains from an innovation
= is determined by how easily/quickly competitors can copy the innovation
Definition of “Patents”
= rights granted by the government that exclude others from producing, using, or selling an innovation
= Innovation must be useful, novel, and not be obvious
What are the different types of Patents?
- Utility Patents
-> protect new and useful processes, machines, manufactured items, or combination of materials - Design Patents
-> Protect original designs for manufactured items - Plant Patents
-> Protect distinct new varieties of plants
Patent Strategies
= Patents can also be monetized by licensing, selling patent rights
= Sometimes firms seek patents to just limit the options of their competitors
= can also earn money through aggressive patent lawsuits
Patent tickets
= Firms sometimes buy bundles of patents just to create a “war chest” to defend themselves from lawsuits by others by offering a credible threat
= Can make it hard for firms to compete and stifle innovation
What are “Trademarks and Service Marks”
= a word, phrase, symbol, design, or other indicators that are used to distinguish the source of goods of one party from goods of another
What is Copyright
= is a form of protection granted to works of authorship
= is a type of legal protection given to original works written by authors
= Work that is not fixed in tangible form is not eligible
What are Trade Secrets?
= Definition: information that belongs to a business that is generally unknown to others
= Firm can protect proprietary products or processes as a trade secret without disclosing detailed information that would be required in a patent
What is needed to qualify as a Trade secret?
= information must not be generally known
= Information must offer a distinctive advantage for the firm
= Trade Secret holders must exercise reasonable measures to protect their secrecy
The effectiveness and use of protection mechanisms
= depends on the industry whether protection is effective or less effective
= pharmaceutical: protection is very effective
= manufacturing: difficult to protect processes and techniques
= Electronics: easy to be invented around
=> Sometimes diffusion a technology may be more valuable than protecting it
What are Wholly Proprietary Systems?
= may be legally produces or augmented only by their developers
What are Wholly Open Systems
= may be freely accessed, augmented, and distributed by anyone
Advantages of Protection
= Proprietary systems offer greater rent
= Rents can be used to invest in further development, promotion, and distribution
= Give the firm control over their technology and complements
Advantages of Diffusion
= More rapid adoption if produced and promoted by multiple firms
= Technology might be improved by other firms
BUT: external development poses its own risks
Factors influencing benefits of protection vs. diffusion
- Can a firm produce enough products or with sufficient quality?
- Are components needed? -> Availability of them?
- Is there industry opposition against sole source technology?
- Can the firm improve technology well and fast enough?
- How important is it to prevent the technology from being altered in ways that fragment its standards?
- How valuable is architectural control to the firm?
