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Journal Article
The software patent experiment.
Over the past two decades, the scope of technologies that can be patented has been expanded to include many items previously thought unsuitable for patenting, for example, computer software. Today, the U.S. Patent and Trademark Office grants 20,000 or more software patents a year. Conventional wisdom holds that extending patent protection to computer programs will stimulate research and development and, thus, increase the rate of innovation. In "The Software Patent Experiment," Bob Hunt and Jim Bessen investigate whether this has, in fact, happened. They describe the spectacular growth in ...
Working Paper
Dynamic Urn-Ball Discovery
Under certain assumptions, monopolistic competition with CES preferences is efficient, as first discovered by Dixit and Stiglitz. One assumption, invariably left implicit, is that there are, at any given point in time, no bounds on the number of products that can be discovered. But square wheels do not work, and round wheels keep getting rediscovered. Giving away patents to entrepreneurs who happen to be the first to discover a product generates an inefficiently large amount of variety. The stock of undiscovered products is a commons that can attract too many discovery attempts. Perpetual ...
Journal Article
The uninvited guest: patents on Wall Street
For at least the past twenty-five years, financial services industries have been creating innovative products and services without the help of patents. The 1998 State Street Bank case changed all this, making patents freely available in these industries. Will patents help or hurt financial services innovation in the long run? This article sheds some light on this issue. ; Before the advent of patents, several ?appropriability? mechanisms protected financial services innovation: ?first mover? advantages, complementary or ?cospecific? assets, and trade secrecy. Evidence suggests that, in the ...
Working Paper
The Paper Trail of Knowledge Spillovers: Evidence from Patent Interferences [REVISED]
REVISED 9/2019: We show evidence of localized knowledge spillovers using a new database of multiple invention from U.S. patent interferences terminated between 1998 and 2014. Patent interferences resulted when two or more independent parties simultaneously submitted identical claims of invention to the U.S. Patent Office. Following the idea that inventors of identical inventions share common knowledge inputs, interferences provide a new method for measuring spillovers of tacit knowledge compared with existing (and noisy) measures such as citation links. Using matched pairs of inventors to ...
Working Paper
Matching and learning in cities: urban density and the rate of invention
This paper examines the role local labor markets play in the production of innovations. The authors appeal to a labor market matching model ( la Berliant, Reed, and Wang 2004) to argue that in dense urban areas, workers are more selective in their matches and are therefore more productive. They find that, all else equal, patent intensity (patents per capita) is 20 percent higher in a metropolitan area with an employment density (jobs per square mile) twice that of another metropolitan area. Since local employment density doubles nearly four times across their sample, the implied gains in ...
Journal Article
Ten years after: What are the effects of business method patents in financial services?
In recent years, the courts have determined that business methods can be patented, and the United States Patent and Trademark Office has granted some 12,000 patents of this sort. Has the availability of patents for business methods increased the rate of innovation in the U.S. financial sector? The available evidence suggests that there has been no significant change in the aggregate trend of R&D investments made by financial firms. In "Ten Years After: What Are the Effects of Business Method Patents in Financial Services?," Bob Hunt discusses how recent court decisions and proposed ...
Working Paper
Nonobviousness and the incentive to innovate: an economic analysis of intellectual property reform
U.S. patent law protects only inventions that are nontrivial advances of the prior art. The legal requirement is called nonobviousness. During the 1980s, the courts relaxed the nonobviousness requirement for all inventions, and a new form of intellectual property, with a weaker nonobviousness requirement, was created for semiconductor designs. Supporters of these changes argue that a less stringent nonobviousness requirement encourages private research and development (R&D) by increasing the probability that the resulting discoveries will be protected from imitation. This paper demonstrates ...
Transfer Pricing of Intangible Assets: Evidence from Patent Data
To reduce their tax exposure, multinationals may seek to shift profits to countries with lower tax rates. Do patents play a role in this strategy?
Working Paper
The case against patents
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity. There is strong evidence, instead, that patents have many negative consequences.