BPUB621.2003.Lecture.Slides.9.Patents

BPUB621.2003.Lecture.Slides.9.Patents - [9](1): Economic...

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Wharton School: [9](1): Economic Problems in the Provision of Ideas and Innovations Ideas and innovations have been a major component of economic growth - over 50% by some estimates Creation of ideas often requires large investments Private protection is more difficult for ideas Creator can only protect them by keeping them secret But if creator uses them for business, they may necessarily be revealed to employees, consumers, and potential imitators Once revealed, ideas are costless to copy or imitate But once an idea is created, it is inefficient to charge for its use Marginal cost of sharing an idea is very low, maybe zero Economic efficiency requires the price be set equal to the marginal cost Ideas are “Public Goods”: once created, an idea can be costlessly used by all
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Wharton School: [9](2): Solutions without Intellectual Property Private Protection of Ideas Creativity will be channeled into ideas which are easier to keep secret Disclosure of ideas will be less likely, so that sharing of ideas is less likely Government provision - government research labs Fund the production of ideas from tax revenue and the distribution ideas for free But government provision is likely to limit rewards and stifle creativity Government subsidy - research grant programs Fund private research from tax revenue with provisions for free distribution Common for basic scientific research National Science Foundation and National Institute of Health But the government approval process may stifle creativity
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Wharton School: [9](3): Intellectual Property as a Solution Incentives from monopoly returns on business applications Powerful incentives IF there is an immediate business application Distort innovation toward current applications rather than basic research Supplement with government subsidies for basic research High prices during the period of monopoly Prices exceed the marginal cost, so inefficient distribution Consumers buy less than the efficient quantity of the new products But require disclosure at the end of the period of monopoly Stimulate related ideas and innovations Administrative problems in defining the boundaries of the property right protection: What is infringement?
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Wharton School: [9](4): Patentable Subject Matter Subject Matter (Section 101): Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent Utility: For commercial purposes Question: Suppose no known current application, e.g. chemical compounds?
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This note was uploaded on 07/27/2009 for the course ECON BPU taught by Professor Perry during the Spring '09 term at Rutgers.

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BPUB621.2003.Lecture.Slides.9.Patents - [9](1): Economic...

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