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In vertically decentralized sectors such as the technology industries, the transfer of ideas between entities often comprises a central aspect of innovation. The availability of IPRs can affect timing of these transfers, making ex ante and ex post (to the grant of IP protection) agreements a strategic choice.
Scholars from the Northwestern University, the University of Melbourne and the University of Pennsylvania have released a study on how IPRs facilitate technology transfer between technology start-ups and more established firms in relation to the timing of patent protection. Joshua S. Gans, David H. Hsu, and Scott Stern. 2007. "The Impact of Uncertainty Intellectual Property Rights on the Market for Ideas: Evidence from Patent Grant Delays" The Selected Works of Joshua S Gans.
The research is an important contribution to how patents enable the market for ideas because it addresses how clear property rights benefit new market entrants, and small-specialized firms.
Gans-Hsu-Stern focus on the Notice of Patent Allowance stage of the patenting process, where the USPTO announces aspects of the claim that may be granted. They link the timing of licensing agreements with the timing of patent applications, allowances and grants. Patent allowances and grants narrow but do not eliminate sources of uncertainty over patents. Based on their findings, the scholars would argue that IPR policy should facilitate ex ante and ex post technology transfers through reduction of uncertainty such that technology start-ups, and the technological community, will benefit from the market for ideas. ...the evidence presented here offers the first direct evidence that private sector innovators are causally influenced by the receipt of IPRs… It is useful to consider what our estimates imply about the overall impact of the patent system on the ability of start-up innovators to access the market for ideas... among a sample of start-up innovators who ultimately reach a licensing agreement, the impact of patent allowance is associated with a 70% increase in… licensing... Licensing between firms in a pre-patent grant period entails uncertainty of the scope and timing of rights, whereas in the post-patent grant period there is narrowed uncertainty over patent scope. Inventors must balance enhanced productive efficiency and reduced time to market for their inventions in the pre-IPR grant phase, with greater bargaining power and more effective transfer after the issuance of protection.
Interestingly, Gans-Hsu-Stern posit that in the absence of deterrances to transactions caused by patent uncertainties, there would be “no systematic relationship between patent allowance and the timing of cooperative agreements.” In other words, patents play a role in technology transfer, but take away various conditions of uncertainty and the value of patents in facilitating licensing transactions diminishes. Thus, the value of patents can be specific to types of inventions, sectors and competitive landscapes. Yet, where patents are important, they play a crucial role. Recent research on the impact of the patent system on technology entrepreneurship emphasizes the potential role of IPRs in facilitating commercialization through the market for ideas. In the absence of formal IPRs, start-up innovators seeking commercialization partners may be subject to expropriation. At the same time, efficient commercialization often requires contracting with more established partners in control of key complementary assets. Formal IPRs may enable technology transfer by reducing the potential for expropriation, thereby increasing the incentives for knowledge disclosure and technology contracting. The market for ideas is not simply limited to transacting patent permissions, but also exchange in knowledge. In other words, patent licensing agreements may be akin to collaboration agreements, an essential aspect of a knowledge-based economy.The role of the strategic disclosure of unprotected complementary knowledge will be particularly important when such disclosures require effort on the part of the licensor. As [Ashish Arora] emphasizes, “[t]echnology licensing involves more than just the permission to use the knowledge covered by patents: In many cases, the information required for successful utilization extends even beyond blueprints, drawings, and specifications and includes heuristics... and other ‘tricks of the trade.’ Gans-Hsu-Stern warn that while patent allowances boost licensing activity, because of the probabilistic nature of patents, many small firms commercialize inventions independently rather than transfer technology or license. This is a non-optimal scenario, since undertaking the full commercialization process on small firms will be inefficient: "The gains from technological trade may include reductions in the costs associated with translating an idea into a commercially viable product and enhancing specialization by firms into knowledge production or commercialization." Therefore, the patent system should be more clear on the rights of patent holders, to reduce uncertainties that small firms associate with misappropriation of their ideas.
posted by Noel Le @ 6:55 AM | Academia, Patents
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