Protecting Intellectual Property

Question 1

Why we care about IPRs?

Answer 1

• can help to appropriate profits from innovation
• can increase incentives to innovate
• The IPRs of others can make a firm’s operative and innovative activity difficult
• IPR of others contains valuable information

Question 2

Formal and informal protection mechanisms

Answer 2

Formal:
- patents
- registered designs
- trademarks
- copyrights
- confidentiality agreements

informal:
- secrecy
- lead time or first mover advantage
- complexity of design
- switching cost
- network externalities

Question 3

Patents

Answer 3

• protection for “Technological Innovation”
• right of ownership over an invention, granted to an inventor by a government for a specified period of time
• possess or contain new functional or technical aspects

Question 4

What is patentable?

Answer 4

• be new
• contain an “inventive step”
• capable of industrial application

Question 5

Patents benefits and costs

Answer 5

Benefits:
- creates costs for rivals (for invent-around) and potentially entry barriers
- profits from licensing
- image (esp. for young firms seeking venture capital)

Costs:
- process cost (EU > 5845€)
- opportunity cost to secrecy (application is made public)
- detection of infringement
- assertion of patent in case of infringement

Question 6

Societal benefits and cost of patents

Answer 6

Dynamic efficiency:
- provide incentive for developing new technology

Static inefficiency:
- low use of existing technology

Question 7

Patent infringement

Answer 7

• must be found out by patent holder
• if court rules in favor of patentee then patentee is entitled to
  -> injunction (infringer must stop using the patented technology)
  -> damages (lost profits of patentee, infringer’s profits, “reasonable royalty”

Question 8

Registered Design

Answer 8

• be new
• have individual character
• fist five years (350€) -> length of term 25 years
• infringement: designer owner must find out
• difficult to enforce except for direct copies
• not a strong form of IP protection, but cheap and simple

Question 9

Trademarks

Answer 9

• sign which can distinguish the goods and services of one trader from those of another
• generally relate to a series of products rather than an individual technology
• 290€ for every 10 years (indefinite renewal possible)
• must be used in order to maintain protection

Question 10

Copyright

Answer 10

• right against copying, protects expression of ideas, not idea
• applies mainly to artistic works but also software
• free and long lasting
• current problem is low cost of (near) perfect copying

Question 11

Relative effectiveness of protection mechanisms

Answer 11

• effectiveness of patents as means of protection of innovations is considered relatively limited
• “superior sales and service efforts” & “lead time” considered most effective mechanisms to enable profiting from innovation