class notes # 4

class notes # 4 - Objectives: - Understand the concept of...

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- Understand the concept of intellectual property and the economic rationale for protecting it - Describe the existing protections for intellectual property, focusing on patents today and copyrights and trademarks. - Property and incentives Property: the protection and control over something either physical or intellectual A property tight cannot be infringed upon without the holders free consent Property can be voluntarily transferred, exchanged or in some cases licensed. o Licensed means that someone lends you the property without losing control over it. It gives someone the ability to use your property for a period of time and for an amount of money. o Patent licensing gives a lot of revenue since it forces people to pay for the use of a product. Licensed property is an incentive to having property Two components to the economics of property rights o Facilitate economic transactions: you can think of facilitation as making it possible to transfer property easily. o Generate incentives to create property because of anticipated returns from its use. You have an incentive to develop a new technique because by patenting you get revenue from the people who want to use it. Economics of intellectual property Production of information is characterized by o High fixed costs o Low marginal costs of copying and dissemination It takes a lot of effort to write a book or to develop a drug, but once you try to copy it is really easy. In the absence of intellectual protection someone can use it and hurt the market of the good. Information has two features once it is created o Typically non rivalries in consumption o Hard to exclude users o It is very hard to control who gets access to this Implication: it will be hard to prevent the dissemination of information, making it difficult to generate returns. If there is no protection, there is no incentive to create. We don’t want to go too far in the protection of property because then it creates monopoly. Lack of appropriability creates two problems o Appropriability means how easy is it for people to get what they create and get returns out of it. o This reduces the incentives to create the information in the first place o This problem is magnifies if information can be easily replicated Intellectual property rights are designed to remedy this problem Enforcement is a key component not just the presence of the right. There is no patent police, it must be identified and fixed through court or personally The technology that made the easy of replication, made it easier to enforce o Technology plays a role both in enforcement and in the ease of replication. Types of IP protection
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This note was uploaded on 11/29/2010 for the course PSC 222 taught by Professor Jing during the Spring '10 term at Rochester.

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class notes # 4 - Objectives: - Understand the concept of...

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