Intellectual property rights business management practices: A … P 2006... · 2018. 3. 11. ·...

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Technovation 26 (2006) 895ndash931

wwwelseviercomlocatetechnovation

Intellectual property rights business management practicesA survey of the literature

Petr Hanel

Universite de Sherbrooke and Centre interuniversitaire de la recherche sur la science et la technologie (CIRST) Canada

Abstract

The survey focuses on the empirical literature regarding the use and management of intellectual property rights (IPRs) It overviews

policy changes regarding intellectual property (IP) protection in the US that led according to some commentators to patent friendly era

in the US Then it looks at the IPRs use and strategies in the US Canada EU Japan and Australia and at the protection of IP in specific

industry groups Also reviewed is the relationship between the use of IPRs and the size of firm and its ownership (national vs

multinational)

Numerous articles show that management of knowledge assets in general and IPRs in particular are increasingly important The value

of firms in knowledge intensive activities is determined by the value of its IP IP is used as a financial asset Firms allocate more human

resources to management of IPRs and their training but there remain important international differences The recent literature on the

impact of IP on the value of the firm its assessment valuation accounting and management of IP are reviewed The last section of the

paper deals with enforcement of IPRs infringement and dispute resolution A special attention is given to internet and computer

infringement of IP and to insurance as a protection for legal costs

r 2005 Elsevier Ltd All rights reserved

Keywords Intellectual Property Rights (IPRs) Property protection Management

1 Introduction

Until recently the non-legal literature dealing with theprotection of intellectual property (IP) was limited in scopeand quantity The situation has changed dramatically sincethe mid-1990s With the increasing importance of knowl-edge private firms and public institutions such asuniversities colleges and research institutes have discov-ered the importance of intellectual property rights (IPR)and their protection

The arcane subject of IP protection ceased to be theexclusive domain of legal departments and became a dailypreoccupation of CEOs in many industries This suddenattention followed from the realization that the value of IPof a typical firm rose in many industries substantiallyhigher than the value of its assets Even though the averagedifference between the market value and the value of assets

e front matter r 2005 Elsevier Ltd All rights reserved

chnovation200512001

3468187 fax +1819 8217934

ess PetrHanelUSherbrookeca

declined in the aftermath of the stock market bubble itremains importantIn the new economy knowledge is the principal

economic asset and its management and protection havebecome the cornerstones of corporate strategy This isreflected in the professional literature For instance thenumber of publications dealing with patents indexed inECONLIT the leading economic database rose from 39publications over the 1981ndash1984 period to 251 publicationsfrom 1999 to 2002 Perhaps even more importantly there isalso a growing body of popular management literaturewith IP as its focusThe present survey is necessarily selective The subject of

IPRs extends from purely legal aspects to formal economicmodels Neither the exclusively legal literature nor theformal economic theories were included in this survey Butof course IP protection and management are determinedby the legal context and the conceptual frameworkunderlying empirical studies is often based on insightsfrom theoretical models

ARTICLE IN PRESS

1Since patenting by universities is outside of the scope of the present

project the large and rapidly increasing literature covering patenting by

universities is not covered here

P Hanel Technovation 26 (2006) 895ndash931896

The survey starts with an overview of changes in the USand international IPR regimes leading to the so-calledlsquolsquopatent friendly erarsquorsquo Surprisingly as Section 3 shows thenotable increase in the use of patents in the US cannot beattributed mainly to favorable changes in the US IPregime The rise of patenting and use of other IPinstruments has often little to do with their effectivenessin protecting IP and much more with their usefulness incorporate strategies blocking competition and providingbargaining chips for cross-licensing Section 4 overviewsthe IPRsrsquo use and strategies in the US Canada EU Japanand Australia It is well known that the importance ofvarious IP instruments varies significantly from oneindustrial sector to another After a brief look at IP inmore traditional industries Section 5 focuses on IPpractices and strategies used in information technologiesand communications including computers software busi-ness methods and Internet applications Patenting in lifesciences applications that would require a separate sectionwas mentioned only to illustrate certain specific points

The empirical literature surveyed in Section 6 shows thatsmall firms are less likely to use IP than larger ones andmultinational corporations (MNC) more likely than firmsowned by nationals The reluctance of smaller firms to useIP is to a certain degree explained by the financial burdenpatenting and patent litigation represents for smallcompanies

With the increasing importance and use of IP itsmanagement is becoming an integral part of a companyrsquoscompetitive strategies The cost of IP its management andthe human resources involved are presented in Section 7 Inorder to better derive value from IP firms use more andmore sophisticated methods The valuation of IP portfo-lios its accounting and integration into corporate financialstrategies are discussed in the following section

Finally references to enforcement infringement andnegotiation of licensing agreements conclude the survey

2 Changes that contributed to the creation of a patent

friendly era in the US

21 Introduction in the US of the court of appeals for the

federal circuit

The introduction in the US of the Court of Appeals forthe Federal Circuit (CAFC) in 1982 marked the beginningof important changes in the US legal environmentregarding the protection of IP It began an era of strongIP rights To document the importance of the change(Jaffe 2000) reports that before 1980 a district courtfinding that a patent was valid and had been infringed wasupheld on appeal 62 of the time between 1980 and 1990this percentage rose to 90 Conversely before 1980appeals overturned only 12 of district court invalidity ornon-infringement decisions That percentage rose to 28in the later period As a result the overall probability that alitigated patent will be held to be valid has risen to 54

Patentees asserting infringement are also now more likelyto be granted a preliminary injunction barring the sales ofthe alleged infringing product during the litigation(Lanjouw and Lerner 1998)

22 US policies regarding patenting of inventions arising

from publicly funded research in federal RampD laboratories

and universities

The rules regarding who can patent have changed Withthe introduction of the Bayh-Dole Act (1980) the policyhas evolved from one in which patenting of inventionsderived from public funding was the exception to one inwhich such patenting is widespread Mowery et al (2001)and Mowery and Ziedonis (2001b) examined the effects ofBayh-Dole at three leading universities the University ofCalifornia Stanford University and Columbia UniversityTwo of these universities (California and Stanford) wereactive in patenting and licensing before Bayh-Dole and one(Columbia) became active only after its passage Theevidence suggests however that Bayh-Dole was only one ofseveral important factors behind the rise of universitypatenting and licensing activity A comparison of thesethree universities reveals remarkable similarities in theirpatent and licensing portfolios 10 years after the passage ofthe Bayh-Dole Act In a subsequent article by Mowery andZiedonis (2001b) the authors extended their analysis to allUS universities According to their analysis of overall USuniversity patenting the patents granted to institutionsthat entered into patenting and licensing after the Bayh-Dole Act are less important and less general than thepatents issued before and after 1980 to US universities withlonger experience in patenting1 Trends and practices inuniversity licensing and intellectual capital managementare discussed by Berneman and Denis in Goldscheider(2002 Chapter 11)Patenting and licensing at public research institutions

received less attention than patenting by universitiesOECDrsquos (2003) report offers a good international overviewof the legal and regulatory framework regarding this issue

23 Expansion of the realm of patentability

The patentable subject matter ie what can be patentedhas expanded The US patent office accepted patentabilityof genetically engineered bacteria and animals geneticsequences (Eisenberg 2000) surgical methods computersoftware financial products methods for auctioning on theWorldwide Web etc According to Kortum and Lerner(1997 1999) the share of biotechnology patents grew fromabout 3 of total patents in 1961 to about 6 andcomputer software from 4 to almost 7 of total patentsin 1991 The increases were even stronger in the 1990s

ARTICLE IN PRESSP Hanel Technovation 26 (2006) 895ndash931 897

However according to the authors those increases do notexplain the growth in total patenting

Among the most important and controversial newpatentable subject matter has been an expansion of thepatentability of software (Graham and Mowery 2001Mowery et al 2001 Mowery and Ziedonis 2001b) and offinancial services products and processes Lerner (2002a b)and Hunt (2001a b) Software that was part of amanufacturing system or process became patentable in1981 (Supreme Court Diamond vs Diehr) In 1998 theCAFC upheld a patent on a software system that performsreal time accounting calculations and reporting for mutualfund companies (State Street Bank and Trust vs SignatureFinancial Group) business methods became patentableFor details see Merges (1997) the most complete andauthoritative text on patent cases complemented witheconomic analysis and business history Conley (2003)overviews the patenting law regarding the businessmethods and argues that the international business methodpatent standards will converge Another controversial fieldis the patenting of research tools genetically engineeredbacteria and animals and genetic sequences (Eisenberg2000) More about new patentable subject matter below

24 Expansion of the patent scope

According to theoretical studies (Kitch 1977 Gilbertand Shapiro 1990 Scotchmer 1991 1996 Green andScotchmer 1995) reviewed by Jaffe (2000) granting broadpatent rights to the pioneering inventor early in thedevelopment will ensure an orderly development of thetechnology by licensing the invention or other contractualarrangements enabling other inventors to contribute tosubsequent development of the technology Howeverempirical studies supporting this theory are few andinconclusive Lerner (1994) found that firms with broaderpatents (measured by the number of International PatentClasses (IPC)) are valued more by venture capitalists Onthe other hand a survey by Scherer and Harhoff (2000)does not find that the number of IPCs is related to patentvalue Sakakibara and Branstetter (1999) looked at theeffects of the change in the Japanese single claim patentsystem to a multi-claim system which presumably awardsbroader patent rights They did not find any indication thatthe broader scope of patents increased incentives to higherresearch spending or higher Japanese patenting in the USIn contrast Merges and Nelson (1990) examined severalhistorical cases and found that the ex ante uncertaintyabout future technology development makes licensing andother contractual arrangements unlikely andor ineffectualthus contradicting the hypothesis on which the theoreticalmodels are based They show for example that the broadlicensing of the original ATampT patent (the result of anantitrust decree which prevented ATampT from exploitingthe patent itself) significantly benefited further develop-ment of the semiconductor industry

25 Changes in the international trade and investment

environment

On the insistence of industrialized countries led by theUS the protection of IP was integrated in the Uruguayround of GATT negotiations that led to the creation of theWorld Trade Organization The trade-related aspects of IPprotection called the TRIPS agreement became one of thecornerstones of the new world trade order (Cockburn andLanjouw 2000) In contrast to other trade agreementswhich introduce common rules that national policies haveto respect TRIPS imposes on all WTO members a common

policy with respect to IPRsThe TRIPS Agreement introduced the following rules

Virtually all commercially important technological areasmust be included within the realm of the patentabletechnology

Patents must be granted for 20 years

Patents must be tested for non-obviousness and utility

as in the US patent system

Patent holders must have the right to prohibit the

importation of infringing products

Limitations are placed on the circumstances under

which governments can order compulsory licensing ofpatents

There are transitional provisions for application of these

measures by the Less Developed Countries (LDC)

Overall these provisions constitute a major strengthen-

ing of patent protection around the world and shiftedthe global rules of the game in favor of industrializedcountries (Lall and Albaladejo 2002)

The most important change to the US patent policy is the

extension of patent from 17 years from the date of grantto 20 years The classic theory on economic effect ofpatent length is Nordhaus (1969) followed by a discussionon the subject (Nordhaus 1972 Scherer 1972)

Patents began to be used aggressively in the standard-

setting bodies especially for telecommunicationscomputers and consumer electronics (Shapiro 2001Granstrand 1999a b pp 203ndash204) According toGranstrand the GSM system for mobile communica-tions systems involved more than 2000 patents of whichabout 30 were standard blocking patents

Another important change is the introduction of priority

from the lsquolsquofirst to inventrsquorsquo to the lsquolsquofirst to filersquorsquo (Jaffe2000)

Gallini (2002) reviews these and some more recent

patent reforms introduced in the US and discusses theireconomic implications The Drug Price Competitionand Patent Restauration Act (Hatch-Waxman Act)attempts to promote innovation in new drugs whilefacilitating generic entry It restores up to 5 years of lostpatent time spent on the Federal Drug Administration(FDA) approval process The first firm to file anapplication for making a generic equivalent to abranded drug receives a 180-day exclusivity while

ARTICLE IN PRESS

2

att

lab

gen

tha3

in

det

(Ro


manufacturers of branded drugs are allowed to request a30-month postponement of the FDA approval ofgeneric drugs that arrive before their patent expires

Some developments aim at counterbalancing the policies

that strengthened or extended the patent protection

The American Inventors Act passed by the Congress in

1999 requires that all patent applications in the US andabroad be disclosed to the public 18 months from theearliest filing date

A reinterpretation of the lsquolsquodoctrine of equivalentsrsquorsquo in

favor of imitators

26 Evolution of the interpretation of IP laws

In his insightful overview of the evolution and critique ofthe patent system Kingston (2001) notes that thereinterpretation of the lsquolsquoinventive steprsquorsquo criterion ofpatentability2 made the patent system suitable for protect-ing inventions which are the result of the purposefulroutine corporate RampD rather than the result of individualingenuity Routine RampD is invested in portfolio of riskyprojects The investment in large RampD portfolios is almostassured of success It results in patent portfolios that areused as bargaining currency to prevent lock-out from state-of-the-art components developed by competitors as muchor even more as they are a stimulus to RampD

The growing significance of products and processesrepresented by complex technologies3 contributes ac-cording to Kingston to the growing importance ofpatent portfolios and patent pools They have theadvantage of giving all members the freedom to usethe technology of all other members without the needfor costly negotiations or litigation Where using patentpools is outlawed firms tend to patent any incrementalimprovement they might want to use in the future inorder to prevent being locked out by a competitorrsquospatent This leads to strategies of saturation patentingdesigned to slow down or prevent competition fromexploiting alternative technological trajectories that arecertainly anti-competitive

3 The trend of patenting in the USmdashwas there a change

what might have caused it and was it beneficial for further

technical progress

The first major empirical study that compared theevolution of patenting in the US before and after the

This change (US patent Act of 1952) was brought about by patent

orneys in the US after discovery of streptomycin (1947mdashresult of long

orious search) in contrast to penicillin (example of the flash of the

ius) invented earlier but not patented since it was considered wrong

t something as useful to mankind could be given a monopoly

Complex technology is a product or process that cannot be understood

full detail by an individual expert sufficiently to communicate all the

ails of the product or process over time and distance to other experts

ycroft and Kash 1999 p 262)

beginning of the lsquolsquopatent friendly erarsquorsquo was the (Kortumand Lerner 1997) paper Kortum and Lerner concludedthat the data does not support the hypothesis of lsquolsquofriendlycourtsrsquorsquo (ie increased patenting in response to changesdescribed above) nor that of lsquolsquofertile technologyrsquorsquo (hypoth-esis that the overall increase in patenting was due to asharp rise in patenting in a few new fields benefiting fromextraordinary progress in science and technology) orlsquolsquoregulatory capturersquorsquo (ie increases in patenting by thelargest firms reacting to a perceived relaxation of antitrustvigilance by accumulating patent portfolios in order toincrease their monopoly power) They concluded that thesource of increased patenting is outside the patent systemand attributed it to more productive RampDThe finding that patenting increased notably in the 1980s

and 1990s is surprising in light of comparisons of surveyevidence that suggests that firms in most industriessurveyed (Mansfield 19844 Levin et al 1987 and morerecently by Cohen et al 2000) have not increased theirreliance on patents for appropriating the returns to RampDover the early 1980s Then as Hall and Ham-Ziedonis(2001) ask if firms in most industries do not rely heavily onpatents to profit from innovation then why are theypatenting so aggressivelyCohen et al (2000) suggest that the reconciliation of

increased patenting and the lack of perceived effectivenessmay lie in the multiple ways that firms use patents Inaddition to protecting the returns on specific inventionsfirms use patents to block products of their competitors asbargaining chips in cross-licensing and to prevent or defendagainst infringement suits These alternative uses of patentsmay be zero-sum games not increasing the returns oninnovations as suggested by Hall and Ham-Ziedonis(2001) They analyzed the patenting of semiconductorfirms and suggest that the observed lsquolsquopatent portfolioracesrsquorsquo are consistent with rising rates of patenting andrising patentRampD ratios without there being any per-ceived improvement in the net value of patents inprotecting the value of innovations They also show thatpart of the increased rate of patenting coincided with theentry of lsquolsquofablessrsquorsquo firms specialized in the design of chipsand contracting their manufacturing to other firms Thispractice would not be possible if the designing firms couldnot protect their creation from being appropriated by thecontracting manufacturerReviewing this empirical research Jaffe (2000) concludes

that there is at best only limited evidence that the up-surge in patenting observed in the 1980s resulted at leastdirectly from the strengthening of patent protection in the1980s He believes that it was the result of a combinationof technological opportunities the build up in govern-ment RampD spending and defense procuring increased

4Mansfieldrsquos survey of research firms found that the effective lives of

most patents were shorter than the stipulated 17 years (this was before the

reform that extended patents in the US to 20 years)


international competition and other factors that increasedthe returns to RampD

According to Jaffe all these factors would have resultedin increased patenting even without strengthening thepatent system but the strengthening of the patent systempresumably reinforced these tendencies There is howeververy little evidence that increased protection of IP had asignificant impact on the innovation process There is atleast as much evidence that patent regime changes causedresources to be diverted from innovation towards theacquisition defense and assertion against others ofproperty rights as there is evidence of the stimulation ofresearch

Reviewing the situation Gallini (2002) notes that therecent extension of patenting to new fields (biotechnologysoftware and business methods) increased the number ofpatents in these areas (Graham and Mowery 2001 Lerner2002a b) In comparison with the 1980s new patentapplications in the US to domestic inventors more thandoubled by the late 1990s Biotechnology and softwarepatent grants doubled between 1990 and 2000 The largest100 universities tripled their annual patent output from1984 to 1994 (Cohen et al 1998) and RampD expenditures ofsmall and medium-sized firms employing more than 5000employees5 more than doubled from 1987 to 1997According to Gallini (2002) the most recent patentstatistics not covered by the original Kortum and Lerner(1997) study and their review by Jaffe (2000) showingmarked increased patenting in the US by foreign patenteeslend more support to the lsquolsquofriendly courtrsquorsquo hypothesisdiscarded in the initial Kortum and Lerner paper

Whatever the causes of the recent upsurge in protectionof IP and patenting a more important question is whateffects the observed trend is likely to have on innovationand the diffusion of technological changemdashthe primaryobjectives of IP protection Ordover (1991) argues thatweak patent protection need not be inimical to economicgrowth and conversely that strong patent protection neednot be an enemy of diffusion An optimal configuration ofpatent law and antitrust rules may ensure incentives forRampD and also induce cooperation among firms in diffusingRampD results through licensing or other means Merges andNelson (1994)6 looked at theoretical arguments the legaldoctrines and empirical evidence of the effects of broadpatent scope decisions on the rivalry in technical progressThey came to the conclusion that the existing practice atthe Patent Office7 allowing overly broad interpretations ofpatent scope lsquolsquoyleaves too much of the job of reining inscope to litigation and courtsrsquorsquo

5Note that the definition of what constitutes a SME in the US does not

necessarily correspond to the concept of SME in Canada6Merges is a leading legal authority on IPRs (cf Merges 1997) and

Nelson one of the most influential economists in the field of technological

change7The exemplary case being patents claiming rights to lsquolsquowhatever useful

may come fromrsquorsquo identification and purification of particular DNA

fragments which is basically a scientific discovery

In a more recent paper Mazzoleni and Nelson (1998)provide a useful overview of the arguments and empiricalevidence in favor and against todayrsquos conventional wisdomthat strong patent rights are conducive to economicprogress Mazzoleni and Nelson show that patents serveseveral functions

the prospect of patent protection provides a motivationfor useful invention

patent protection may be needed to induce investments

to develop and commercialize them

patents are awarded to induce inventors to declare their

inventions

patents may be needed to permit orderly exploration of

a broad prospect of inventions

The authors are arguing and present case evidence thatstrong patents were often not necessary to induce inventionand entailed significant economic costs They conclude thatthere is reason for concern that the present movementtowards stronger patent protection may hinder rather thanstimulate technological and economic progress For ahistorical perspective on the evolving relationship betweenIP and antitrust in the US see Hart (2001)As (Jaffe 2000) earlier Gallini (2002) is not sure whether

the recent surge in patenting is beneficial for technologicalprogress and economic growth She structured her reviewof the recent literature on the economics of patents aroundthree important questions

Do stronger patents stimulate more innovation

Do stronger patents encourage more disclosure

Do stronger patents facilitate technology transfer

In response to the first question Gallini admits thepossibility that strengthening patent rights may havealready placed the US at the peak of the lsquolsquoinverted Ursquorsquorelationship in which further strengthening of patents doesnot spawn more innovation For details on the lsquolsquoinvertedUrsquorsquo see the empirical study of 177 patent policy shifts in 60countries over 150 years (Lerner 2001) In a more recentpaper Davis (2004) argues that while patents have becomemore valuable to firms they seem to have become lesseffective in motivating RampD If true this would suggestthat the social cost of patenting is increasing and the socialbenefits declining One of the distinctive features of thepatent friendly era is the increasingly blurred dividebetween science and technology In theory practicalinventions can be patented and scientific discoveriescannot In practice scientific discoveries are increasinglybeing patented Nelson (2004) argues that this is badfor the advance of science and for the advance oftechnologyIn a related line of research studies that looked at the

relationship between the stringency of patent protectionand innovation performance found that those countries

ARTICLE IN PRESSP Hanel Technovation 26 (2006) 895ndash931900

that have an effective protection of IPRs fare better ininnovation (Park 2001 Kanwar and Evenson 2003)

Do stronger patents encourage more disclosure Inaddition to the conventional trade-off between thepresumed stronger incentives for innovation and thedisclosure of inventions stronger patents may inspirestrategic patenting for the purpose of cross-licensing andthereby facilitate the exchange and diffusion of newtechnologies (Hall and Ham-Ziedonis 2001) Strategicpatenting thus may be socially beneficial in encouragingthe disclosure of information to other firms and inaverting costly litigation However the strategic accu-mulation of patents in patent pools creates high barriersto entry (Barton 1998) New semiconductor firms mustspend $100ndash$200 million in licensing fees for basictechnologies that may not be all that useful (Hall andHam-Ziedonis 2001)


Empirical research suggests that licensing is moreprevalent in industries where effective patent protectionis available as in biotechnology and chemical industries(see below Arora and Fosfuri 2000) It also encouragesvertical specialization (Arora and Gambardella 2000)According to Gallini a stronger legal right to excludeothers from using an invention generally provides astronger economic incentive to include them throughlicensing The discussion of various examples ofstrategies used in different industries shows howeverthat while strong patents may facilitate the transfer oftechnology they also may facilitate anticompetitivebehavior (Anderson and Gallini 1998) There ishowever strong evidence that licensing increasedsignificantly in recent years (Goldscheider 2002 Chap-ter 1 by Manfroy)

4 Overview of the IPRs use and strategies in the United

States Canada Japan EU and elsewhere

41 The use of IPRs in the US

Microeconomic empirical studies of patenting in the USby Scherer (1959) and Mansfield et al (1981) Mansfield(1985 1986) and in the UK Taylor and Silberston (1973)called into doubt the hypothesis that patents effectivelyprotect innovations from imitation The studies alsoshowed that patent protection is important only in a fewindustries most notably in pharmaceuticals These dis-quieting findings were largely confirmed and documentedin the ground-breaking study by Levin et al (1987) Thisstudy based on a large-scale representative lsquolsquoYalersquorsquo surveyof experts from US manufacturing industries found thatfirms typically trust and use alternative strategies such aslead time secrecy the use of complementary sales andservices more than statutory IPRs to appropriate innova-tion-related benefits Given its capital importance for the

subject of this review it is resumed in greater detailbelowTo examine what effects the series of pro-patent

measures had adopted since the beginning of the 1980s inthe US a follow-up survey (sometimes called lsquolsquoYale IIrsquorsquo)was launched by Carnegie Mellon University in 1994(Cohen et al 2000) Their paper reports IPR relatedfindings from some 1165 cases included in a mail survey ofRampD managers in a large sample of US manufacturingfirms and business units complemented by interviews withRampD managers and IP officers at nine firms The principalobjective of the study was to examine how firms appro-priate (or not) results of their RampD activities andinnovations the effectiveness and the use (or not) ofvarious IPRs and alternative methods and whether patentscontribute to the advancement of technology The secondmotivation was to provide a managerial perspective offirmsrsquo strategies to protect their inventions and theparticular role of patentsThe study confirms that patents are considered as being

a significantly less effective means for appropriation ofbenefits from innovations than lead time secrecy com-plementary manufacturing and complementary servicesPatents are however perceived as more effective thanother legal IP mechanisms Patents more effectively protectproduct innovations than process innovations Secrecy isconsidered equally effective for the appropriation ofbenefits from product and process innovations Detailsare available for 3-digit manufacturing industriesAlthough never reported as the most effective appropria-

bility mechanisms in any industry patents are the centralvehicle for protecting product innovations in pharmaceuticalsand medical equipment (effective for more than 50 ofproduct innovations) They are somewhat less central but stillvery important in special purpose machinery computersauto parts and miscellaneous chemicals (effective for about40ndash50 of product innovations) In contrast semiconductorsand communication equipment and electronic componentsreport patents effective for only 27 26 and 21 ofproduct innovations respectively Patents are generally evenless effective for protection of process innovations which arebest kept secretFor the non-patented inventions the principal reason

not to patent is the difficulty in demonstrating noveltyHowever the most frequently cited reason for notpatenting is the ease of legally inventing around a patent(65 of respondents) followed by the lack of novelty(55) and by information disclosure (47) Small firmsare deterred from patenting by the cost of litigation (seealso Lerner 1994) In comparison with the earlier survey(Levin et al 1987) patents appear to be somewhat morecentral in larger firms in a larger number of industries Farmore prominent however is the jump of secrecy from lastplace in the Yale survey to tie for first place in the presentsurvey The disclosure aspect of patents is also accordingto Duguet and Kabla (1998) the main reason why Frenchfirms do not patent all their inventions


As demonstrated the number of patented inventions hasincreased notably since the beginning of the 1980s Thesurvey asked respondents to check off in a non-exclusivemanner which of the following reasons motivated theirmost recent decision to apply for product and processpatents

prevention of copying preventing other firms frompatenting a related invention

the earning of license revenue

to strengthen the firmrsquos position in negotiations with

other firms (as in cross-licensing) prevention ofinfringement suits

to measure the internal performance of the firmrsquos

technologists and

to enhance the firmrsquos reputation

The prevention of copying is the first reason reported by99 and 89 of the respondents for the product andprocess patents respectively The second-most importantreason was to prevent rivals from patenting a relatedinvention (77 and 69 respectively) and close behindwas the prevention of suits (74 and 63 respectively)Next patents are filed to strengthen a firmrsquos position innegotiations (58 and 49 respectively) and less im-portant to enhance its reputation (38 and 32respectively) and to earn licensing revenue (33 and 30)

There are however significant differences across in-dustries in the way that patents are used They are closelyrelated to differences between lsquolsquocomplexrsquorsquo and lsquolsquodiscretersquorsquotechnologies (Levin et al 1987 Merges and Nelson 1990Kusonaki Nonaka and Nagata 1998 Kash and Kingston2000) Firms in lsquolsquocomplexrsquorsquo technologies patent mainly fornegotiations (81) and cross-licensing (55) while farfewer firms in lsquolsquodiscretersquorsquo product industries use patents forthese reasons (33 and 10 respectively) The papershows that the taxonomy based on complex and discretetechnologies also explains other differences in patentstrategies

One of the most recent and interesting accounts ofpatenting strategies comes from the Stanford Workshop onIntellectual Property and Industry Competitive Standards1998 As noted in the Rapporteurrsquos summary (Headley1998) the debates were based on the model of innovationthat involves a set of incremental and often quite differentcontributions by different firms each building upon thework of the others By the time an idea becomes acommercial product it has had many owners eachcontributing special skills and in the aggregate hasteningthe rate of innovation (Scotchmer 1996 1991)

In addition to papers on different industries (reportedbelow) we present here the main points from the synthesisof the workshop findings by Barton (1998) According toBarton the use of patents depends on the competitivestructure of the industry They are used in three generalpatterns to create a specific monopoly (the normaleconomic model) the use among competitors in an

oligopolistic industry and the vertical use among suppliersand customers

411 Use of patents to create a monopoly

This is the sole case that conforms to the economicmodel The IP creates a monopoly position for a productor process and exercise of the monopoly provides ex antean incentive and ex post a reward for the innovation orauthorship This monopoly pattern is possible when the IPeffectively defines rights over a specific product or categoryof products or a process essential to the production of acategory of products (the case of discreet technologies inCohen et al 2000) These are situations typically found inthe traditional pharmaceutical and chemical industrieswhere each product is likely to have a monopoly positionfor its specific use (or at least to have very strong marketpower in comparison to alternatives that are technologi-cally second-best) Such a monopoly position is what theleading agricultural biotechnology firms are currentlyseeking in their effort to use IP to drive competitors outof the business This is what Polaroid did in its 1981 suit toexclude Kodak from the instant camera industry

412 Use of IP in horizontal oligopolies

In many industries however the patent network is suchthat a number of competitors are routinely infringing othercompetitorsrsquo patents Although it might be possible for onefirm to acquire a dominant portfolio through licenseacquisition or successful litigation and thus move into amonopoly position the more typical pattern is that a numberof oligopolistic competitors each hold substantial portfolioswhich they use to maintain freedom of action rather than toexclude competitors Typical semiconductor situations (cfHall and Ham-Ziedonis 2001 Cohen et al 2000) presentevidence that overall blocking competitors and the preven-tion of suits were the second and third most importantmotivations for patenting (after the prevention of copying)The result of the cross-infringements may be an armed

truce with each firm dissuaded from bringing suit againstits competitors by the likelihood that a suit would be metby a countersuit In other situations there may be formalcross-licenses These may be royalty-free or with a flow ofroyalties based on a very rough estimate of the comparativestrength of the different firmsrsquo portfolios Where one of thefirms has a significantly more powerful position than theother the cross-license may still be less symmetricalproviding for example that the weaker party obtains onlythe rights needed from the stronger party to pursue aspecific line of innovation or to market a specific productwhile the stronger party obtains much broader rights to usethe weaker partyrsquos IPLitigation will occur in a number of situations it may be

used against would-be entrants who have not purchasedlicenses from the existing oligopolists Firms which havesolid patent portfolios but relatively weak market positionsmay have little concern about countersuits and therefore bemore willing to seek royalties If the patent portfolio balance


among different firms diverges too radically from the cross-royalty payment pattern litigation may be part of therenegotiation process as perhaps in the case of IBMrsquos desireto operate its patent department as a profit center or in theDEC-Intel litigation of 1997 Litigation may also be a methodof signaling or communicating with a competitor conceivablysuch a mechanism could be used to sanction a firm cutting theoligopolistic price In these horizontal situations there mustbe oligopolistic pricing as distinguished from competitivepricing in order to create the surplus needed to supportresearch and development

The effects on the research level are unclear Plausiblythe same conscious parallelism mechanisms that establishprices may also establish innovation levelsmdasha firm needs tobasically stay abreast of its competitors but does not haveto push the technology frontier unless it hopes to gainmarket share Nevertheless it seems clear that the rate oftechnological change in semiconductors is essentially at thelimits of human research and organizational capabilitySimilarly aircraft technology may be essentially at thelimits of the marketrsquos ability to amortize research andmanufacturing expenditures8 In those contrasting situa-tions patents are evaluated very differently

The most valuable patents are not those likely to be usedby the patent holder but those likely to be infringed uponby competitors because the main role of the patent is as abargaining chip to buy freedom of action The value of apatent is therefore a function of its engineering importanceof the ratio between the total sales of competitors using thetechnology and the patent holderrsquos sales using competitorsrsquotechnology and of the propensity of the industry tolitigate A patent is worth more in the hands of a weakcompetitor than in the hands of a strong competitor

413 Use of IP in vertical relations with suppliers and

customers

The workshop defined a further category of vertical uses

of IP vis-a-vis suppliers and customers Two broadcategories of examples were presented

(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

In one IP is used as part of an effort to allocate rentsbetween different levels of production or development

he patenting level follows the research levelmdashand is effectively defined

e most active patenter in an industry Where patent disputes have not

the tradition eg the semiconductor industry before Texas

uments lawsuits there is generally no need to obtain patents except

n insurance against the possibility of such lawsuits (or as rewards for

neers) Once the threat of litigation arises however all firms must

a portfolio the construction of the portfolio is essentially a process

eeking filings on interesting developments that emerge from the

rch (that is already motivated by the need to keep up with

petitors) The photography case (see below) suggested an additional

for a patent portfolio to define one as a lsquolsquoplayerrsquorsquo Apparently it was

art the strength of different firmsrsquo patent portfolios that led to the

ce of the firms to participate in the consortium to develop the

anced Photo System Presumably under pressure of antitrust

iderations the patents were then licensed to those not in the

ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c

In the other it extends power at one level of productionor development to obtain a stronger position at ahigher or lower level of production with respect to thenext generations of technology9

(ii)

In the other vertical use of IP firms are not merelyusing IP to negotiate the allocation of rents rather theyare using it to obtain next-generation power inneighboring markets This power is almost alwaysexercised through the provisions of a strategic allianceA firm that is dominant at one level uses its controlover its own IP to gain power and protect itself fromcompetition from suppliers or customer firms that needaccess to that IP to produce next generation products10

As it should be clear from the discussion above in bothcases (horizontal and vertical correspond to lsquolsquocomplextechnologiesrsquorsquo according to Cohen et al 2000) patenting isdriven by strategic reasons and not by the desire to protectones invention against imitation Rivette and Klein (2000)and other authors of recent popular books on IP strategiesurge managers to apply for patents and use them moreaggressively Cohen et al (2000) caution managers aboutthe possible risks and costs related to relying too heavily onpatenting strategies when alternative methods such asbeing first in the market may be less costly and moreeffective Another concern of economists is that anexcessive reliance on patents is likely to reduce the flowof RampD spillovers between firms thus reducing one of theimportant sources of innovation-related increases inproductivity

42 Overview of the recent research regarding the use of

IPRs in Canada

Firestonersquos (1971) book was the first comprehensivesurvey of the use of patents in Canada The EconomicCouncil of Canada survey (De Melto et al 1980) examinedmajor innovations introduced in five Canadian manufac-turing industries The study concluded that only about32 of the major 283 innovations introduced in Canada in

hese uses are becoming extremely significant Two examples show the

of allocating rents among different production or development steps

is aircraft manufacture another biotechnology In the latter firms (and

ersities) are seeking IP on lsquolsquoresearch toolsrsquorsquo such as reagents or

maceutical screening procedures and seeking to license the use of

e for developing final products in return for a royalty defined as a

entage of the sales of that product In neither of these examples will

IP significantly affect the final rent (the airframe companyrsquos or the

maceutical firmrsquos ability to extract a rent on the product) rather it

ts the allocation of that rent between the different entities involved in

esearch effort The result of IP is to give several entities a veto on final

uct development and therefore to affect the terms and negotiability of

ngements to deal with the rights of these entities at different levels of

uct development

Illustration by the case Intergraph versus Intel (cf below the section

omputer chips)


the proceeding 20 years were patented According to thatstudy

(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech

The propensity for patent innovations increased withthe size of the innovating firm

(2)

Foreign-controlled firms (and even more so those underUS control) patented significantly more (39) thantheir domestically controlled counterparts (23)

(3)

Innovations based on imported technology werepatented in Canada more often than innovations basedon technology developed in-house

(4)

There was a clear positive association between the costof an innovation and patenting the more costlyinnovations were more likely to be patented

(5)

The rate of patenting declined over time especially inthe last half of the 1970s This tendency of firms to relyprogressively less on the patent system to protect theirmajor innovations was noted also in the US and latermotivated the influential study by Levin et al (1987)

14Baldwinrsquos study is based on the Statistics Canada (1993) Survey of

Innovation and Advanced Technology which surveyed both small and

large manufacturing firms The more recent Statistics Canada Survey of

innovation 1999 surveyed only larger manufacturing firms For this and

other methodological reasons the two studies are not strictly comparable

(Hanel 2003)

In Table 1 below is presented the percentage of larger firms (firms in

Business register of Statistics Canada) that used of IPRs in 1989ndash91

Table 1 Use of intellectual property by innovators and all

A report commissioned by Industry Science andTechnology Canada Consumer and Corporate AffairsCanada and the Science Council of Canada (Industry1989) looked at attitudes practices and interests ofCanadian industry with respect to IPR11 The authorsfound that (1) even though the majority of respondentswere satisfied with Canadian IPRs there was an importantvariance by industry sector and size of firm Smaller firms12

and firms in the lsquolsquonew economyrsquorsquo sectors such as softwaredevelopment and biotechnology expressed the most dis-satisfaction with the Canadian IPRs13 (2) The secondmajor finding of the study was the high reported degree ofinfringement and counterfeiting Between 32 and 40 offirms in the four groups indicated that their IPRs had beenviolated in the 4 years preceding the study A largeproportion of firms complained that litigation was tooexpensive especially for the smaller firms and the penaltiesinsufficient to prevent infringement (3) A significantnumber of firms stated that they had insufficient knowledgeor expertise with respect to IPRs (4) Finally with theexception of copyright users firms from all other sectorsexpressed that they had difficulties in terms of the time andcosts involved in registering and obtaining IPRs

The report surveyed a sample of 900 firms broken down into four

ps Top RampD performers (100) high technology firms (300) medium

low technology firms (400) and major copyright users (100)

Smaller firms with sales less $5 million used IPRs less than larger firms

were less satisfied with Canadian IPRs

These responses have to be considered today in a proper perspective

endments to the Copyright Act introduced in June 1988 extended

right protection to computer programs strengthened the right of

ts to control who uses their work and improved systems to collect

rights The new act also increased penalties for infringement of

right up to a maximum of $1 million with prison terms ranging from

onths to 5 years The Canadian Patent Act also underwent significant

ges in 1989 Thus the dissatisfaction and criticism that the Canadian

s did not provide sufficient protection and had not kept pace with

nological developments may not any more be valid today

The study based on Statistics Canadarsquos Survey ofInnovation and Advanced Technology 1993 coveringthe period 1989ndash1991 found that there are substantialdifferences in the use of trademarks patents trade secretsindustrial designs and copyrights between those firmswhich had just innovated in the three preceding years andthose which had not Trademarks were the most popularform of protection followed by patents and trade secretsindustrial designs and copyrights (Baldwin 1997 Elias2003 Fishman 2002)14

Baldwinrsquos study corroborated earlier findings by show-ing that (1) the use of IPRs increases with the size of firm(2) The use of intellectual protection varies significantlybetween industries The inter-industry differences in the useof IPRs are at least in part determined by the technologysector (Robson et al 1988) the nature of the productstheir stage in the life cycle and competitive conditions (3)Product innovations (with or without a change in produc-tion process) were more than twice as likely as pure processinnovations to be patented Process innovations lendthemselves better to protection through secrecy (4) Largerfirms are more likely than smaller ones to introduce aworld-first innovation (5) Some 15 of innovations oflarge firms are world-firsts The firms that introducedworld-first innovations made in general much greater useof all IPRs instruments than the less original ones (6)Foreign-owned firms irrespective of their size industry ortype of innovation had recourse more often to intellectualprotection instruments than Canadian-owned firms Theresults of the 1993 innovation survey also show that the USfindings by Levin et al (1987) which suggest that firms tendto value alternate strategies more highly than the statutoryforms of IP protection also apply for Canada Moreover

manufacturing firms 1989ndash1991 ( of firms)

Intellectual Property Right

Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082

Source Statistics Canada Survey of Innovation and Advanced Technol-

ogy 1993 (Special tabulation from Hanel 2003)

Note Only larger firms included in the business register Not directly

comparable to Baldwinrsquos (1997) that includes smaller firms


the population of manufacturing firms as a whole rankssuch strategies as patent protection as being less thanlsquolsquoeffectiversquorsquo15 However these rankings depend very muchon the characteristics of a firm If a firm is innovativelarge foreign-owned and operates in one of thoseindustries that tend to produce more innovations thescore given to the statutory forms of protection likepatents increases greatly On average users of patents findthem effective so too do large foreign-owned firms Manyfirms use alternative strategies such as increasing thecomplexity of product design to fend off imitation orbeing first in the market to appropriate benefits from theirinnovations These strategies are judged to be moreeffective in appropriating benefits from innovation than areliance on statutory IPRs

421 Appraisal of the recent evolution of patenting in

Canada

The 1989 reform of the Canadian Patent Act introduceda series of important modifications followed by the repealof compulsory licensing in 1992 The first-to-invent patentsystem was replaced by the first-to-file system and theduration of the patent grant was extended from 17 to 20years These and other changes expanded the scope ofpatent protection in Canada Whether the new patentpolicy impairs or encourages innovation is still disputed(Friedman et al 1991) As in the US (Kortum and Lerner1997) the rate of growth of patent applications in Canadafrom foreign and domestic inventors alike has dramaticallyincreased from the mid-1980s Canadian inventors alsoincreased their patenting in the US According toRafiquzzaman and Whewell (1999) the increase is due toa combination of effects of lsquolsquofertile technologyrsquorsquo and alsquolsquopatent favorable environmentrsquorsquo However according tothe index of patent strength16 reproduced in Rafiquzzamanand Ghosh (2001) in spite of the recent reforms Canadarsquospatent system is still weaker than that of all G7 countriesThe effect of 1989ndash1992 patent reforms in Canada on thepropensity of foreign inventors to patent there has beenexamined by Gallini et al (2001) Their preliminary resultssuggest that using a single index of patent strength toexplain a combination of various changes like those thatwere implemented in Canada is not entirely satisfactory

The increased patenting is closely correlated withincreased RampD spending (Trajtenberg 2000) Morespecifically there is convincing evidence that changes inthe Patent Act also induced a significant increase in RampDand innovation activity in at least one particular sectormdashthe pharmaceutical industry (Pazderka 1999)

15Note that firms may not have confidence in the effectiveness of patents

to protect their inventions from imitation (or other IPRs) and use them

anyway for other strategic reasons (Cohen et al 2000) such as to signal

their technological prowess on the stock market or on the labor market to

attract highly qualified manpower etc16The index takes into account the coverage memberships in interna-

tional patent agreements protection against the loss of IPRs enforcement

mechanisms and duration of patent protection Ginarte and Park (1997)

Even though the increase of domestic and foreignpatenting by Canadian inventors is good news it doesnot necessarily follow that the increased number of patentapplications signals an improvement in the composition oftechnological change in Canada and its lsquolsquoqualityrsquorsquo In aprovocative paper (Trajtenberg 2000) argues that

(i)

the direction of technological change in Canada is sub-optimal

(ii)

the quality of Canadian patents is lagging behind theUS patents

(iii)

the high proportion (35) of Canadian unassignedpatents ie granted to individual inventors andanother 19 owned by foreigners is additionalevidence of weak innovation performance in Canada

Trajtenbergrsquos analysis is based on a comparison of theindustry composition of US patents granted to Canadianand US inventors (i) according to his study Canada islagging in several leading technologies such as computerelectrical and electronic while being unduly concentratedin traditional fields (mechanical and others) (ii) Measuredby their citation rate the lsquolsquoqualityrsquorsquo of patents granted inthe US to Canadian inventors is lagging behind USpatents (iii) The high proportion of patents granted inCanada to individual investors and their tendency tocommercialize them less than patents granted to firms havebeen documented in detail by Amesse (1991) and Seguin-Dulude and Desranleau (1988) recently commented on byTrajtenberg (2000)The latest study by Rafiquzzaman and Mahmud (2002)

shows that overall Canadarsquos innovation performance hasimproved since the work of Trajtenberg Instead oflsquolsquomissing the technology boatrsquorsquo Canada has made im-pressive progress in innovating in the areas of strategicallyimportant technologies such as computers and commu-nications electrical and electronics and drugs and medi-cines Canadarsquos propensity to patent in terms of the ratio ofUS patents to RampD expenditures has also increased inrecent years Canada ranks third after the US and Japan inthe production of patents per RampD dollar In recent yearsCanada experienced an explosive growth rate in filingpatents in the US during the period 1997ndash1999 Canadarsquospatent applications growth rate in the US was exceededonly by those of the US and JapanWith regard to the quality of innovations according to

Rafiquzzaman and Mahmudrsquos study Canadian innova-tions have improved as measured by the rate of citation ofpatents compared to other G-7 countries except the USEven though Canadian innovations are well above averagequality the lsquolsquoquality indexrsquorsquo indicates that Canada stillsuffers a quality gap as measured by the numericaldifference in the average quality of patents between theUS and Canada Nevertheless this gap has been narrowingsince 1998 Similar trends in the citation of patents areobserved across all industries except drugs and medicines


where Canadian patents are on average cited morefrequently than US patents

In an attempt to measure the use of IPRs in varioussectors of the Canadian economy (Charles et al 2001)computed indices of patent intensity (number of patentapplications per $ billion PIB) for major groups ofmanufacturing industries and services in 1999 Similarlythey related the use of copyright and trademarks to thelsquolsquoeconomic importancersquorsquo of sectors where these IPRs areused These indices give an idea of the relative importanceof IP in various sectors

An increase in the use or strength of IPRs does notnecessarily lead to GDP or productivity increases Theeffect is likely to be indirect through increased RampDinvestment (Park 2001) However the relationship be-tween IPRs investment in RampD and innovation and theinnovationrsquos impact on productivity is complex As recentmicroeconomic research shows (Baldwin and Hanel 2003Baldwin et al 2000) the effect of patenting as an incentivefor innovation is far from being evident once thesimultaneous nature of the underlying relationships isproperly taken in consideration A study of a large sampleof Canadian pharmaceutical firms (Lazarus 2001) failed touncover a link between patent policy and innovation inCanadian biotechnology firms17

The data from the 1999 Statistics Canada InnovationSurvey analyzed by Hanel (2003) show that two thirds ofall larger manufacturing firms in Canada use at least one ofseveral IP rights18 The proportion of firms (innovating andnon-innovating alike) that use IPRs increases with the sizeof firm (Rafiquzzaman 2001) Firms operating in the coresector19 that feeds innovations to the secondary and lsquootherrsquosector and to the rest of the economy protect their IPmore often than firms in the secondary sector Firmsoperating in the low-tech lsquootherrsquo sector use them least Theclose association of the use of IPRs with the size of firm isalso observed within each technology sector It suggeststhat the cost of learning and effectively using the protection

17Lazarusrsquo study includes an interesting discussion of the real meaning

of patent-count based indicators and their use misuse and interpretation

in empirical studies18Table 2 Use of intellectual property by innovation status ( of all

manufacturing firms included in the business register)

Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661

Source Preliminary results of Statistics Canada Innovation Survey 1999

Note The statistics from the 1999 Survey presented in this and all other

tables and figures are weighted by the gross business income and are

representative of the population of Canadian manufacturing lsquolsquoprovincial

enterprisesrsquorsquo19Including most high-tech industries except aircraft industry

of IP discourages small and medium-sized firms from usingsuch protection as frequently as larger firms doMost original world-first innovators and companies that

perform RampD regularly use all IP instruments the mostfrequently Firms using IP especially trade secrets trade-marks and patents are more likely to introduce innova-tions20 Using patents and also trademarks seems to be anintegral part of a successful innovating strategy whichconsists of performing RampD regularly financed in part bygovernment subsidies and grants aiming at introducingworld first product innovations for domestic and foreignmarketsThe majority of firms apply for patent in Canada but

many also apply in the US Two thirds of companies whichapply for patent do so in both countries Less than 10 offirms that apply for a patent do so exclusively in the USAbout 20 apply exclusively for a Canadian patent andsome 5 apply elsewhere The tendency to apply forpatents in the US increases with the extent of patenting andthe size of firm Firms that apply for more than ten patentstend to patent more in the US than in Canada Overall theevidence suggests that even though IP rights may not be theperfect means of appropriating benefits from innovationcompanies that protect their IP are more likely to succeedin maintaining their profit margins or in increasing theirprofitability than companies that do not

43 Patenting and IPRs use in European countries 21

One of the earliest empirical works on the practice andimpact of patenting was the Taylor and Silberston (1973)study lsquolsquoThe Economic Impact of the Patent System in UKrsquorsquoThe survey covered chemical and engineering industriesAmong the information that is still interesting today isrelationship between the size of patent departments andeconomic characteristics of firms and their activities Thestudy also provides information about the cost andbudgeting of patenting and related activities It gives anoverview of patenting and licensing practices their dura-tion licensing payments restrictive provisions exclusivityand refusals Also covered is the pure lsquolsquoknow-howrsquorsquolicensing Examples of the calculation of royalty rates arealso presented In addition the survey inquired into theimpact of patenting and licensing The section oncompulsory licensing and its impact also includes adescription of a restrictive practice of lsquotiedrsquo leasing a

20However the econometric analysis taking into account the complex

interdependence between firmrsquos decisions to invest in RampD to innovate

and to patent suggest along the lines of (Baldwin et al 2000) that the

causal nexus is stronger from innovation to patenting than the other way

round21A brief account of the European patent system (European Patent

Convention Anonymous 1995) its relationship with its relationships to

various national systems in Europe including the chronology of main

events is presented in Pitkethly (1999) The European Patent System

Implementing Patent Law Harmonization Electronic Journal of Intellec-

tual Property Rights WP99 Oxford Intellectual Property Research

Centre httpwwwoiprcoxacukEJINDEXhtml


procedure under which machines were leased to users oncondition that the later should obtain all their auxiliaryequipment and materials (including non-patented ones) aswell as new machines from the lessor This practice wasdisallowed in the UK in 1907 but in reality was used until1951

The decisive majority of respondents surveyed by theTaylor and Silberston study indicated that the existence ofpatents had a negligible effect on their RampD hence therewas little indication that patents led to wasteful RampD forlsquoinventing aroundrsquo Some of the industry specific pointstreated in the study are presented below Some 20 yearsafter the pioneering study by Taylor and Silberston theEuropean Patent Office (EPO) surveyed a thousand smalland medium-sized European firms with less than 1000employees that applied for at least one patent (EPO 1994)These firms reported to have patented over 50 of theirpatentable inventions However no information is avail-able for firms that did not patent Neither does the reportprovide information on patenting by the size of firm or bysector The survey-based information on patenting inSwitzerland can be found in Harabi (1995) and for Swedenin Granstrand (1999a b)

A joint survey by MERIT in the Netherlands and SESSIin France surveyed patenting by Europersquos 604 largest firmsin 1993 (Arundel and Kabla 1998) Their results showthat as in the US patents are of greatest value in a fewsectors such as pharmaceuticals chemicals and machinerywhere the cost of copying an innovation is considerably lessthan the initial cost of invention Also as in the US patentsare relatively unimportant compared to alternative appro-priation methods such as lead time advantage or technicalcomplexity in sectors that produce complex products costlyto copy or in sectors with high barriers to entry (egspecific expertise and large investment) such as in theaerospace industry The patent propensity in the early1990s in the EU was lower than the propensity to patentobserved in the US by Cohen et al (2000)22 One possibleexplanation suggested for the difference is the lower cost ofpatenting in the US than in Europe the other is the effectof pro-patent reforms in the US

Arundel and Kabla report that the average propensity topatent23 product innovations in EU was 36 (rangingfrom 81 in textiles to 792 in pharmaceuticals) and248 for process innovations (ranging from 81 intextiles to 468 in precision instruments) Regressionresults that control for the effect of the industry sectorshow that the propensity to patent increases with the size ofthe firm Firms that find secrecy to be an important methodfor product innovations are less likely to patent butsecrecy has little effect on patenting process innovations

22The comparison is only approximate due to differences in sampling

questionnaire differences and definitions used in both surveys23Defined as the of firmrsquos innovations for which a patent application

was made in the last 3 years

The RampD intensity of the firm has no effect on patentpropensity rates for both product and process innovationsAfter controlling for the effect of other factors the activitysector has a strong influence on product patent propensitiesbut very little effect on process patent propensities Resultsof the French survey presented by Duguet and Kabla(1998) indicate that firms patent mainly to build a strongnegotiating position and to avoid litigation The propensityto patent is reduced by the reluctance of firms to discloseinformation according to their econometric study the costof patenting and litigation does not have an effect onpatentingGranstrand (1999a b) attributes the lower propensity to

patent in Europe compared to Japan to a condescendingattitude of West European engineers towards minor lsquolsquojunkrsquorsquopatents He maintains that the correlation between thelegal quality the technical quality and the economicquality is not highTrends in the protection of IP by trademarks and patents

in the UK US and Europe of a sample of a panel of UKmanufacturing and financial firms are discussed andanalyzed by Greenhalgh et al (2001) They find that thedecline of the rate of British patenting in UK and Europeduring the 1990s was not compensated by a slight increasein US patents In contrast trademark applicationsincreased both for firms in manufacturing and in financialservices especially during the mid-1990s Smaller firms aremore than proportionally active in acquiring IP assets Aninteresting British study estimated separately the effect ofRampD and IPRs on the productivity of a firm Somewhatsurprisingly firms in high technology industries registerlarger returns on RampD while those in low technologysectors show more significant returns on IPRs (Greenhalghand Longland 2002) See also Pitkethly (2001) comparingthe British and Japanese IP strategiesThe perception that Europe is lagging behind the US in

IPR systems led to the establishment of the EuropeanTechnology Assessment Network (ETAN 1999) whoseWorking Group produced the report lsquolsquoStrategic dimensionsof IP rights (IPRs) in the context of science and technologypolicyrsquorsquo Too long to be overviewed here some of thesubjects of interest to the present survey include

A recognition that the awareness of the importance ofIPRs has to be improved through education both inuniversities and the business community

Acquiring European-wide patents is too costly espe-

cially for the SME

The cost of IPR litigation especially patents is too

costly and discourages the use of the system by SMEand spin-off companies

Further harmonization is suggested

The present IPR system is not well adapted to new

technologies

The report discusses and recommends tax regime

changes that would reduce the effective cost of acquiringIPRs


In comparison to the Bayh-Dole Act and its presumedeffects on patenting by US universities and publicresearch labs the European regime is not well adaptedto higher education incentives

24Formerly a Japanese patent covered a single claim25The assessment regards the Japanese patent system before the reform

that replaced the single claim by the multiple claim principle

The contribution of IPRs to development of colla-borative projects with industryndashcreation of spin-offcompanies

The study by Legler et al (2000) analyzes indicators fortechnological performance including patent RampD inno-vation and investment activity in Germany including aseparate account of the current level of innovation activityin Germanyrsquos new states It outlines both actual develop-ments and the development potential of Central andEastern Europe (CEEC) and assesses its threat toGermanyrsquos competitive position in selected fields oftechnology

Thumm (2000) presents results of a survey of patentingby European biotech firms Almost two thirds of surveyedfirms are satisfied with the protection the patents provideThe main reasons for patenting are safeguarding andcommercialization of technology in view of licensingnegotiations Patents are crucial for the production ofgenetic products and for the launch of RampD not only byprivate firms but also by some universities Only 18 ofcompanies use secrecy smaller firms more than larger onesItalian firms most and British firms least The authordiscusses the strategic reasons for patenting He emphasizestwo situations the first characterized by over-patenting thatleads to the tragedy of the uncommons ie the under-use ofpatentsmdashand the second the tragedy of the commons ietoo much use of unprotected IP Thumm examines thesituation in countries of CEEC that introduced in the early1990s new national patent legislations oriented towards theEuropean Patent Convention Those countries are alsocommitted to TRIPS He notes that so far foreigners usethe new patent systems more than nationals thus raisingthe question of the patent systemrsquos contribution to nationalinnovation activity The questions related to the relation-ship between the protection of the IPRs and their economicconsequences for the CEECs remain however largelyunanswered to date

Among the other potentially interesting sources ofinformation on IPR in Europe the proceedings of theconference lsquolsquoPATINNOVA rsquo90 Strategies for the protec-tion of innovationrsquorsquo Tager and von Witzleben (1991) shouldbe mentioned They provide detailed accounts of IPRprotection in several European countriesrsquo industries andmajor as well as small and medium-sized firms

A descriptive account of basic SampT activities measuredby Science Citation Index (SCI) publications and EPOpatents at various levels (regions within EU withincountries countries within EU) and their evolution duringthe period 1988ndash1995 is presented in Zitt et al (1999) Theiranalysis suggests an overall but slow tendency towardsgeographic homogenization in science and a more chaoticpicture in technology

44 The use of IPRs in Japanmdashcomparison with the United

States and other countries

Japanrsquos rapid technological and economic progressbefore the 1990s has been the focus of many studies someof which concentrated on the differences in management ofIPRs between Japan and the US and other countriesAlthough I did not come across a comparative study ofJapanese and Canadian IPRs and their use and manage-ment the example of Japan is potentially very interestingbecause there as in Canada innovation is led by the largercompaniesBefore the patent reform in 1988 the Japanese patent

system was conducive to licensing and cross-licensing In1988 Japanrsquos patent system switched from a single claimper patent to a multi-claim system similar to the one usedin other industrial countries The 1987 reform alsomodified the rules for registering the utility models (JapanPatent Association 1988) Because of the adoption of amulti-claim regime24 patent applications have graduallyincluded part of the technological improvements thatwould have been previously applied for as utility models(The Japan Patent Office 1991) cited by Okada and Asaba(1997) in Goto and Odagiri (1997) A clear and timelyoverview of differences between the patent systems in theUS and Japan and their implications on innovationregimes in both countries is presented by Sakakibara andBranstetter (1999) As in the US the number of patentapplications and grants has increased dramatically sincethe 1980s This seems surprising because the patent systemreforms introduced in Japan in 1988 significantly expandedthe extent to which multiple claims (dependent orindependent of other claims) and related inventions canbe included in a single patent According to patent expertsafter the 1988 reforms the scope of invention covered by asingle application equaled or even exceeded that conferredby US and European patent systems (Industrial ResearchInstitute 1996) This is also conveyed in manuals forprivate sector patent experts which describe the impact ofthese reforms (Hiraoka et al 1988 Japan Patent Associa-tion 1988)Ordover (1991) presents the Japanese patent system as

an example of patent law designed for cooperation anddiffusion of innovation lsquolsquoThe Japanese patent system25 is acomplex web of policy choices more or less consciouslystructured to affect RampD diffusion while maintainingoverall incentives for RampD investmentrsquorsquo The 1988 reformstrengthened the patent right making infringement easierto prove and prosecute Firms are now allowed to usepatents defensively Rules of disclosure are different in theUS and Japan In Japan patent applications are auto-matically published 18 months after filing In the USpatent information is released only after the patent is


granted (typically about 2 years but sometimes only aftermany years)26 The short and predictable delay ofdisclosure in Japan is conducive to rapid diffusion ofinformation (spillovers) According to Aoki and Prusa(1996) that leads Japanese firms to make smallerimprovements than they would under the US system

The first-to-file rule in Japan versus the first-to-inventrule in the US pushes inventors and innovators to filepatents sooner in Japan Information is thus disseminatedearlier (Ordover 1991) and more extensively than under analternative system (Scotchmer and Green 1990) Inaddition in Japan applicants can modify the applicationas long as the modification does not expand the scope ofthe original application In Japan examination of a patentdoes not start automatically with application but onlyupon request it can be deferred for up to 7 years Hencethe inventor has the opportunity to file a patent sooner

In Japan there had been a pre-grant opposition systemin the US third parties can oppose a patent only after it hasbeen granted Under the pre-grant opposition regime theapplicant can react to opposition by quickly grantinglicenses to third parties (Ordover 1991) Since potentialopponents may adopt the same strategy the system wasfavoring cross-licensing In a move to strengthen patentprotection Japan adopted a post-grant system like that ofthe US in 1996

The penalty for patent infringement was much lower inJapan than in the US (see details in the section oninfringement) Japan favored fast technological develop-ment by awarding utility models for minor inventions(similar to the German system) Utility models wereundergoing an examination system as patents and pro-tected the model for 15 years They were also favoringminor incremental innovation Econometric evidencesuggests that patents lsquocausedrsquo the number of applicationsfor utility models which typically introduce incrementalinnovations (Maskus and McDaniel 1999) Incrementalinnovations are believed to be of critical importance forcapturing returns from original innovations (Rosenbergand Steinmueller 1994) Since 1994 the utility models areno longer being examined and the protection period wasshortened to 6 years after application date These changesare perceived as to have nullified the protection providedby utility models causing utility model applications todecline in favor of patents

The second part of Ordoverrsquos (1991) article providesempirical evidence of the implications of the patent systemdifferences between Japan and the US on innovationbehavior in both countries

(1)

26

pate

1999

of A

The Japanese patent system leads to a better and fasterdiffusion of information than the US system and new

The best known example of such a lsquosubmarinersquo patent is the Lemelson

nt filed in 1954 and granted after 38 years in 1992 (Granstrand

a b p 173 note 23) However according to Sears (2002) US Court

ppeals fro the Federal Circuit refused this practice in a recent ruling

technology is imitated faster in Japan than in the US(see also Cohen et al 2002 Okamaoto et al 1996 oncost of patenting in Japan)

(2)

In Japan as in Canada but in contrast to the US RampDincreases more than proportionally with the size offirm In the US firms with fewer than 1000 employeesaccount for 22 of corporate RampD (Sakakibara2001) while they account for only 16 in Japan Thissuggests that consistent with the patent system largefirms contribute to innovation more in Japan than inthe US

(3)

The modification to a multi-claim patent system inJapan in 1987 is believed to have shifted the innovationin Japan from incremental to a more US-like productinnovation The proportion of process vs productinnovation that was about 23ndash13 in Japan and 13ndash23 in the US in the 1980s (Mansfield 1988 but Scherer2005 explains that the difference was due to anincorrect translation of the survey questionnaire)seems to have converged in the 1990s According toCohen et al (2002) about 81 of Japanese firmsdedicated their RampD to product innovation comparedto 66 of US firms in the 1990s This would suggestthat Japan has become less incremental-innovationoriented

(4)

The weaker protection provided by the patent system inJapan than in the US is believed to have led to morefrequent alternative appropriability mechanisms suchas technology alliances in high-tech industries in Japanthan in the US The Okada and Asaba (1997) chapterin Goto and Odagiri (1997) underlines the institutionalparticularities of the Japanese system (utility modelssingle claim per patent pre-grant disclosure anddeferred examination pre-grant opposition) and dis-cusses their probable effect on the increasing propensityto patent in Japan (no of patents1000 scientists andengineers) The main objective of the paper is aneconometric analysis of determinants of patent pro-pensity in Japan

The differences of IP regimes in Japan and in the UShelp to understand some of the important differencesbetween the two countries with regard to collaborationbetween industry and universities In Japan it is recognizedtoday that the collaboration between universities andindustry should be improved The promulgation of theTechnology Transfer Law in 1998 favoring formation oftechnology transfer offices (TTO) in the universities wasaimed at improving this unsatisfactory situation (Mansfieldand Romeo 1980) Kneller (1999) describes the pre-1998procedures used in Japan to transfer technology fromuniversities to industry and compares them with thesituation in the US The IP rights to inventions belongedto the inventor or to the nation (the principle calledlsquolsquoinventors retain rightsrsquorsquo) according to decisions ofuniversity invention committees The practical effect ofthis procedure was not conducive to effective transfer of

ARTICLE IN PRESS

29Grandstand (1999b pp 180ndash191)30Grandstand (1999b pp 202ndash208)31Grandstand (1999b pp 210ndash216)32Sears (2002 pp 234ndash255)33Given the limited size of the sample (24 observations) the information

may be considered as a series of case studies rather than a statistical

P Hanel Technovation 26 (2006) 895ndash931 909

technology from universities to industry nor to thecr1eation of spin-off companies by university resear-chers The lsquolsquoinventors retain rightsrsquorsquo principle has beenupheld in the 1998 law that favors creation of TTO Theauthor believes that given the way the lsquolsquoinventors retainrightsrsquorsquo principle worked in the past it is unlikely that thenew 1998 rules would lead to a substantial improvementin Japan of the collaboration between industry anduniversities

The most comprehensive study examining IP usemanagement and strategies in general and in Japan inparticular is Economics and Management of Intellectual

Property (Granstrand 1999b) In addition to the detailedaccount and analysis of the results of his own survey oflarge Japanese corporations the author compares theJapanese situation and the strategies of large corporationsin Sweden and also occasionally in the US

Granstrandrsquos historical overview of Japanese patentingprovides an enlightening introduction to the subject It maybe well known for example that the Meiji dynasty openedJapan to the world in 1868 and introduced a patent systeminspired by the US and Europe 3 years later Likely lesswell-known however is the introduction of the lsquoOrdinanceProhibiting Innovationsrsquo by the Tokugawa dynasty in 1718in order to prohibit lsquonew thingsrsquo Subsequent to theintroductory chapter is a comprehensive overview of thephilosophy and history of IP followed then by adescription of the general framework of IP including anextensive survey of the economic and managementliterature up to the mid-1990s The book also contains auseful summary of economic theories concerned with IPand patents

Granstrand reminds the reader that with regard to themonopoly power conferred by patents an importantdistinction to be made is that a patent provides first ofall a monopoly on an input (1) many other costlycomplimentary inputs may be needed before monopolyprofits are gained and (2) as with many inputs a patentmay be substituted by other patented or non-protectedsolutions27

The evolution of RampD spending and patenting inindustrial countries is compared up to 1991 followed bythe survey data on RampD and patenting in large Japanesefirms (chemical electrical and mechanical)28 After thepresentation of the Japanese patent system the remainderof the book is dedicated to a discussion of patentingpractices and strategies by Japanese corporations based onthe authorrsquos survey and interviews he has conducted Thatis followed by an insightful description of Japanesetechnology and commercialization strategies and a com-parison of means for the commercialization of new producttechnologies in Japan Sweden and US These strategiesinclude patents secrecy lead time switching costs and

27Grandstand (1999b p 48)28Grandstand (1999b pp 137ndash175) See also Granstrand (1999a)

superior marketing29 The author discusses strategiesrelated to the use of IPRs in standardization30 IP policiesand strategies and the advantages and disadvantages ofpatenting in general and specifically in Japan31 His surveyshows that lsquolsquothe status of patent activities within the firmrsquorsquoas well as the lsquolsquostrategic role of patentsrsquorsquo lsquolsquolicensesrsquorsquo andlsquolsquotop managementrsquos attention to patentingrsquorsquo all increased inJapan over 1987ndash1992 He stresses that unlike theEuropean and US corporations Japanese corporationsconsidered patents as the most effective means of capturingprofits by restricting competition One of the specificfeatures in Japanese strategy was the propensity to engagein technology-related product diversification in co-evolu-tion with product-related technology diversification there-by benefiting from economies of scale scope and speed (asexemplified by the case of Canon) The chapter on patentstrategies is particularly interesting and informative Thepresentation of various strategies (patenting trademarksecrecy licensing and litigation strategies) is completed andillustrated with survey results detailed for the threeindustry sectors3233

His discussion of the analysis of patent information as asource of technical information is complemented by awarning regarding the use of patent statistics34 TheAppendix presents the methodology and research tools(the description of the survey the sample and thequestionnaire) used for corporate benchmarking35 and acomparison of corporate patenting in Sweden and Japanwhich may be a valuable source of information for similarstudies I will return to some of these specific issues belowin the relevant sections of the reportIn the synthesis of his richly documented book

Granstrand argues that we are entering an era ofintellectual capitalism ie systems dominated by privateownership of intellectual capital an issue resumed anddeveloped further in Granstrand (2000)36

45 Protection of IPRs in Australia

Intellectual Property Australia contracted from (NewFocus Research Pty Ltd 2000) a report on Awareness ofIntellectual Property among Australian firms The report isbased on a survey by interviews and telephone interviews ofthe awareness of various types of enterprises of IP and theiruse of IP The report contains the questionnaire and the

picture of responses of large Japanese corporations34Sears (2002 pp 290ndash299)35Sears (2002 pp 357ndash365)36Sears (2002 pp 318ndash25) See also Granstrand (2000) in Research

Policy


tabulation of responses with brief observations for severalgroups of firms

3

SME which go through patent attorneys and thosewhich go directly through IP Australia

firms from the tertiary sector

SME which do not use patents trademarks or designs

and also

38The Kefauver Committee on Administered Prices and Drugs

(Washington 1961) found that patents are of vital importance in the

formation of drug cartels39Discrete industries include those with ISIC codeo2900 (eg food

textiles chemicals drugs metals and metal products Complex industries

are those ISIC code42900 (eg machinery computers el equipment

Large-scale enterprises LSE

Responses are provided by each group on a wide rangeof issues relative to the awareness of IP how IP is valuedand understood by users and non-users the perception ofIPrsquos importance methods of protection and reasons for IPuse and existing barriers to IP use Also treated is the useof patent office services attorneys and various media Thelast group of subjects covers training on IP issues theopportunities for IP Australia in the lifecycle of developingprotecting and commercializing IP The discussion of thefuture role of IP Australia and top priorities for readjust-ment to meet future needs concludes this interesting report

5 Protection of IP in specific industry groups

In the following section a brief account of principalstudies of the use effectiveness strategies and obstacles ofIPRs by principal industry groups is presented Industriesare regrouped approximately according to similaritiesobserved in empirical studies of IPRs

51 Chemicals pharmaceuticals food textiles metals and

metal products

Even though there are some significant differences in IPeffectiveness use and strategies among industries includedin this group the similarities are more important Taylorand Silberstonrsquos finding (1973) that RampD first in pharma-ceutical and second in chemical industries is moredependent on patent protection than in mechanicalengineering still holds An account of licensing by chemicalindustries is presented in Smith and Parr (1998)

More recent surveys by Levin et al (1987) and Cohen etal (2000)37 established that patent protection is considereda more important effective means of appropriation ofinnovation benefits in pharmaceutical industries than inchemical industries and in chemical industries more thanin most other industries Cohen et al found that patentsare considered effective for 50 of product and 36process innovations in pharmaceutical industries com-pared to about 38 and 25respectivelyfor chemicalindustries compared to the average of 35 of product and23 of process innovations for all industries Granstrand(1999a b) shows that in Japan taking patents to deterimitators is more important for large chemical firms thanfor firms from electrical or mechanical industries The

7Detailed industry responses are available in the paper

strategic role of patents increased from 1987 to 1992 in allJapanese industries but most in large chemical firms Notsurprisingly then the figures on corporate resourcesdedicated to patenting show that the Japanese chemicalfirms have a higher percentage of employees dedicated topatent activities 032 than the manufacturing industryrsquosaverage of 018 The ratio of patent costs to RampD coststells the same story (31 in large chemical companiesversus 23 for aggregate manufacturing industriesrespectively)Von Hippel (1988) comes to the conclusion that the

value of a patent depends to a great extent on how thepatent offices of corporations (patentees) and the courtshandle the potential and actual infringement of patentrights These in turn depend on the type and complexity ofpatented technology hence the type of industry Contrast-ing examples are patents for pharmaceuticals and chemicalsubstances which are considered most effective and on theother extreme most patents protecting semiconductors andelectronics which are considered to be worth very littleChemical and pharmaceutical patents cover a well-definedchemical composition they are unusually strong anddifficult to invent around (Taylor and Silberston 1973)cited by von Hippel (1988 pp 48ndash53) Chemical andpharmaceutical patents are easily marketable (see patentmedicines) generate royalties and are relatively highlyvalued38 In contrast electronic and communicationdevices and semiconductors typically use many patentsbelonging to different firms In these fields it is very likelythat a new technology may infringe on patents belonging toother firms Except for relatively few patents that wereupheld by the courts the principal value of patents is toserve as bargaining chips for settlement and for cross-licensingIn chemical and pharmaceutical industries IPRs effec-

tively define rights over a specific product or category ofproducts or process essential to the production of acategory of products Each product is likely to have verystrong market power or a monopoly position for its specificuse (Barton 1998) This corresponds to the concept oflsquodiscreet technologiesrsquo described in Cohen et al (2000)39

Chemical engineering built an objective vocabulary thatallowed explicit and clear patent descriptions Clear patentdescriptions meant that a patentrsquos validity could be reliedupon resulting in relatively secure patents Yet cleardescriptions perhaps in conjunction with chemical en-gineeringrsquos historical affiliation with academia also helpedprevent patents from becoming excessively broad in

electronic components instruments and transport eqpt and exclude ISIC

3600 other manufacturing (Cohen et al 2000)


scope40 The lsquodiscrete technologyrsquo that characterizesthe chemical and pharmaceutical industries had accord-ing to Arora and Fosfuri (2000) two important im-plications

First patents provide an easy means for an innovator tolicense the technology to incumbents or new entrantsUnfortunately patents can also lead to holdup problemswhere a patentee blocks entrants and impedes currentcompetitorsrsquo innovation efforts Second certain industrieshave historically different licensing practices which can giverise to a market for specialized service providers (Specia-lized Engineering consultants and construction firmsmdashSEF) who license process innovations rather than sellproducts As service providers their licensing practices arevery liberal and especially conducive to facilitating newentrants avoiding most if not all holdup problems

The motivation of patenting strategies in lsquodiscretetechnologiesrsquo is to build patent fences around a coreinvention patent to foreclose patenting of substitutes byrivals Typically in these industries patents are rarely usedfor cross-licensing (Cohen et al 2000)

In Canada firms belonging to chemical petroleumrefining and pharmaceutical industries used all IP mechan-isms more than firms from other industries (Hanel 2003)41

Surprisingly in Canadian companies from the chemicalsector patents are used less frequently than trademarksand especially less than commercial secrecy

40However this is not the case of new organic chemical products See

Merges and Nelson (1994) discussing the effect of patent scope (breath of

the patent claims) on rivalry in technical progress in case of cumulative

(sequential) technologies In case of inventions that are a starting place for

inventions of tomorrow (sequential inventions) patents with broad scope

allow todayrsquos inventors proceed into the next stage of inventing without

fear of encroachment by outsiders outsiders are deterred from participat-

ing because of the likelihood that their invention will be held infringing In

contrast if allowed scope is narrow outsiders are less deterred from

competing in the next round of inventing (Scotchmer 1996 Green and

Scotchmer 1995) Merges and Nelson argue with the help of case histories

that the recent court practice that awarded overly broad patent claims

(Genetech the Harvard mouse) in terms of a principle rather than in terms

of product actually produced is a way of privatizing public science and as

such is socially not desirable because of its potential of blocking future

technical progress Mandeville (1996) comes to a same conclusion from the

information theory perspective41Table 3 The use of IP mechanisms used by innovating firms in

chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

Patents Trademarks Secrets

Petroleum and coal 93 31 58 58

Chemical 87 48 67 55

Pharmaceutical 94 59 75 56

All manufacturing 73 40 55 39

52 The pharmaceutical industry

The pharmaceutical industry is different from otherchemical industries in some important ways A detailedreview of the literature on the use of IP in thepharmaceutical industry is outside the terms of referenceof the present studyAs noted by Magun (p 405) cited by Pazderka (1999)

and (Pazderka and Stegeman 2001) development of newdrugs is considered by most analysts as the best example ofthe textbook case for patent protectionThe initial cost of developing a pharmaceutical invention

is very high However once the patented formula is knowncopying is possible at very low cost (more so than in otherhigh-tech industries) and as a result of free-rider behaviorthe amount of investment in pharmaceutical RampD wouldbe less than socially optimalThe character of pharmaceutical inventions enables the

IP to effectively define rights over a specific product orcategory of products or process and each product is likelyto have very strong market power or a monopoly positionfor its specific use (Barton 1998)Chemical and drug industries produce highly and neatly

codified technology packaged and ready for sale (Mande-ville 1996)There is extensive literature on patents in the pharma-

ceutical industry Some of it is reviewed in Pazderka (1999)Pazderka and Stegeman (2001) Weston (1998) and Barton(1998)Effective protection of IP in pharmaceuticals is likely to

increase its output profit and employment as shown byItalyrsquos example Italyrsquos introduction of patent protectionfor pharmaceuticals in 1978 was preceded by lengthydebates and worries about its impact on the domestic drugindustry A study by G Jori 10 years later reviewed thesituation and concluded The domestic industry has beenstrengthened investment in RampD increased there has beenno reduction in employment profits have increased andinternational companies have invested more in Italy (Tagerand von Witzleben 1991)

53 Information technologies and communications

This section includes an overview of IPR use andmanagement in several fields On the one extreme are IPRsand their management by semiconductor computer andcommunication equipment producers on the other ex-treme the management of IPRs by firms producingsoftware databases and business methods

531 Semiconductors computer and communication

equipment

While the patent propensity (measured as the number ofpatent approvalsRampD expenditures in the US) in allmanufacturing industries as well as in lsquocomputing andelectronicsrsquo and in lsquopharmaceuticalsrsquo declined from the late1970s to early 1990s patent propensity of semiconductor


firms increased notably With the exception of TexasInstruments which had a large patent portfolio before the1980s other semiconductor firms did not patent widelybefore 1982 ie before the introduction of the CAFC Forthe evolution of patenting of semiconductor devices andmanufacture in the US and the ranking of corporationswith more than 15 patents over the 1969ndash1999 period seeUSPTO (2000)

According to innovation surveys (Levin et al 1987Cohen et al 2000) RampD managers in semiconductor firmsconsidered patents among the least effective mechanismsfor appropriating results of RampD investments They wereconsidered less effective than alternative strategies such asbeing first in the market secrecy short product life cyclesetc Why then are semiconductor firms patenting soaggressively Hall and Ham-Ziedonis (2001) explore thisapparent paradox They also address the other intriguingquestion of what effect the stronger patent rights have onpatenting by firms engaged in rapidly advancing cumula-tive technologies (such as multimedia or computer andsemiconductors) Firms in these fields often require accessto a lsquothicketrsquo of IP rights in order to advance technology orto legally sell or produce their product

The authors present a summary of interviews withindustry representatives of some 100 semiconductorproducers (excluding unfortunately the large lsquolsquosystemsrsquorsquomanufacturers such as IBM Motorola or Siemens) and aneconometric analysis of the patenting data

The main findings from the interviews are resumed hereThe authors start with the hypothesis that the surge insemiconductor patenting is a consequence of the pro-patenting shift in the US legal environment They examinethe following lsquolsquooperationalrsquorsquo hypotheses

Do firms most vulnerable to lsquolsquohold-uprsquorsquo in the new patentregime (ie firms with large sunk costs in complexmanufacturing facilities) respond lsquolsquostrategicallyrsquorsquo to theinstitutional shift by expanding their patent portfolios withwhich to trade

Did the strengthening of US patent rights facilitatevertical integration and emergence of lsquolsquotechnology specia-listsrsquorsquo ie more patent intensive design-firms as suggestedby Arora and Merges (2004)

The findings of Hall and Ham-Ziedonis (2001) suggestthat

1

42The increased patenting by US universities in the wake of the Bayh-

Dole Act (irrespective whether it was a direct cause and effect relationship

or not cf Mowery and Ziedonis 2001) contributed also probably to the

rise of patenting in semiconductors contributed also probably to the rise

of patenting in semiconductors (Henderson et al 1995)

The large manufacturers have indeed invested moreheavily in the lsquolsquopro-patentrsquorsquo period and appear to beengaged in lsquolsquopatent portfolio racesrsquorsquo aimed at reducingconcerns about being held up by external patent ownersand at negotiating access to external technologies onmore favorable terms Stronger patent rights areparticularly important in attracting venture capitalfunds and in securing proprietary rights in nichemarkets Thus the paper confirms the validity of thelsquolsquostrategic patenting responsersquorsquo by capital-intensivefirms The authors find little support for the regulatorycapture hypothesis (also rejected by Kortum and Lerner

(1997) ie the view that the surge in semiconductorpatenting is driven by the scale effects alone or byaggressive post 1982 patenting by Texas Instrumentsthe firm with the largest patent portfolio With regard tothe alternative hypothesis that the surge in patenting isdriven by the unrelated improvements in managementand productivity of RampD (hypothesis accepted byKortum and Lerner as the explanation of the overallincrease in US post-1982 patenting) the authors too findevidence of managerial improvements primarily in howsemiconductor firms manage their IPRs rather thantheir RampD

2

As for the emergence of technology specialist designfirms the lsquolsquobargaining chip use of patentsrsquorsquo appeared lessprominent in the interviews with firms specializing in thedesign of semiconductor products Unlike the manufac-turers the design firms seem to seek to secure stronglsquolsquobullet proofrsquorsquo IPRs to technologies in their niche

Thus patents appear to be an imperfect but quantifiablemeasure of technology that enabled technology-basedtrades to be made in external markets both in financialmarkets for venture capital and with suppliers and ownersof complementary technologiesStronger patent rights may have facilitated entry by

specialized firms and contributed to vertical disintegrationin the semiconductor industry (Merges 1997 Arora andFosfuri 2000) But these positive effects coincide with atrend to accumulate large patent portfolios in order to usepatents as bargaining chips leading to patent portfolioraces42 This trend was greatly helped by the apparentlowering of standards of lsquolsquonon-obviousnessrsquorsquo lsquolsquousefulnessrsquorsquoand lsquolsquonoveltyrsquorsquo after 1982 For more details see (Grindleyand Teece 1997) below On patent pools cross-licensesand standard setting and related business strategies ingeneral and on semiconductors in particular see Shapiro(2001)For more detailed observations on the semiconductor

industryrsquos IP management and strategies in consortia seeTilton (1973) Ham et al (1998) Grindley and Teece (1997)and Headley (1998)Grindley and Teece (1997) provide a detailed account of

the pro-active approach to IPR management in Semicon-ductors and Electronics and specifically linking IPR to corebusiness developing patent portfolios and the licensingpractices of leading firms (RCA ATTampT IBM IntelHitachi Hewlett-Packard etc) The article offers examplesof how leading companies managed IP and created patentportfolios and how these were generating royalty revenuesfrom firms that had less to offer in exchange The licensingstrategies were shaped by public policies This was notably


the case for ATT which was until 1984 a regulatedmonopoly and was obliged by the antitrust consent degreeto license its IP to everyone for minimal fees Thecompetitive strategies and IP practices of telecommunica-tion firms are also discussed by Kefauver (1993) SimilarlyIBM was covered by the consent decree and practisedlicensing lsquolsquoto ensurersquorsquo the right to manufacture and marketproducts protected by patents belonging to other firms

The article discusses the types of cross-licensing used androyalties paid in relation to a firmrsquos strategies and the life-cycle of their products The practice of cross-licensing has adouble positive effect on innovation (1) it provides firmswith a return on innovation thus helping them to fundfurther RampD while (2) allowing them to concentrate theirinnovation and patenting activities according to theircomparative advantage The authors conclude that licen-sing recently became an important activity in semiconduc-tors electronics and computers owing at least in part topolicy shifts in the US See also Tilton (1971) and vonHippel (1988) for the description of the earlier evolution inthese sectors The footnotes contain useful references toother studies as well as to information on the casesdiscussed in the text The current situation in semiconduc-tor and computer industries was discussed at the StanfordWorkshop in 1998 and is presented in the Rapporteurrsquosreport that also includes references to industry specificreports (Bresnahan on computer industry Rostoker onsemiconductors) Interesting points brought forward byindustry experts are integrated in the (Barton 1998)synthesis43

532 Protection of IP in the software industry and business

methods

The US Patent Office had been refusing patents onsoftware and mathematical algorithms per se ie indepen-dently from a device using it until the early 1970s Theprotection of software was initially ensured by copyrightsrather than by patents The arrival of personal computerswas associated with the explosive growth of the softwareindustry and the beginning of software patenting in the USMore recently the development of e-trading led to theintroduction of patenting for business methods and multi-media

In contrast the law in relation to business methodpatents in the United Kingdom and in EPOs has notchanged A way of doing business lsquolsquoas suchrsquorsquo cannot beprotected however some protection for business methodsmay be obtained by claiming a new inventive technicalmethod of implementing a business method This isparticularly relevant in the e-commerce arena where therehave been and continue to be technical innovations The

43Even though not belonging to ITC industries the introduction of the

Advanced Photographic System is a very interesting recent example of

various IP strategies in the field of consumer products It was discussed by

Workshop participants and included in Rapporteurrsquos report as well as in

Bartonrsquos synthesis

report by Likhovski et al (2000) analyses the law in the USand Europe and includes a survey of the EPO and UnitedKingdom patent filings for business methods The surveyindicates that US companies are now filing significantlyand proportionately more applications for business meth-ods than their European counterparts In the EPO over thesample period 52 of all patent applications for businessmethods were filed by US nationals By contrast overroughly the same period US nationals filed only 28 of allapplications In the United Kingdom Patent Office 31 ofall business method applications were filed by USnationals By contrast in 1997 and 1998 US nationalsfiled only 10 of all patent applicationsThe earlier history of the software industry and the use

of IPRs to protect software and business methods (both bycopyrights and patents) are documented in Graham andMowery (2001) and in Merges (1997)44 and Ordover(1999) The essential source of information on theevolution of the software industrymdashincluding the closelyrelated aspects of IPRs evolution in Japan and Europemdashare the two recent collections of papers by invitedspecialists edited and co-edited by Mowery (1996 1999)and by Mowery and Nelson (1999) Merges (2003)discusses the likely impact of patents on financial servicesinnovation and concludes on an optimistic note thatpatents for business methods are unlikely to create realand lasting problemsThe latest addition of a new type of IP subject matter are

databases that received in EU a lsquolsquosui generis protectionrsquorsquoie a specific right to protect them against copying InCanada as in the US databases are protected by copyrightandor by business methods The concept of database theirproviders and users in Europe US and Canada and theirprotection by IPRs are presented in Scotchmer and Mauer(2001) which cites Howell (1998) and Knopf (1999) assources on database IPRs protection regarding CanadaspecificallyThe problems and risks for the future development of

open science posed by the EUrsquos directive introducing lsquosuigenerisrsquo protection of databases and similar initiatives inthe US are emphasized by David (2000) Davidrsquos list ofreferences includes in addition to references to databasesand their protection several sources regarding electroniccommunications by Internet and related subjects

533 IP and the Internet

Most material on IP related to Internet e-commerce anddigital enterprise are found on the Internet Wipo (2003)website for SME provides a useful reference source for therelationship between IP Internet and electronic commerceThe lsquolsquoguidersquorsquo provides information on how a firm shouldaudit its IP assets relevant to e-commerce how to protectits IP when designing a website issues related to Internet

44Merges discusses the practical and legal aspects and presents the case

against the protection of software and business methods by patents and

proposes alternative solutions


domain names and distribution of content on the Internetthe patent issues in e-commerce IP concerns related to e-commerce international transactions etc

A particularly comprehensive volume on IP in electroniccommerce its valuation and protection in the globalmarket is Simensky et al (1999) It contains 62 chapters(too many to review here) The first part presents the roleof IP in on-line commerce The second treats accountingfinance and valuation The third part deals with protectionof IP followed by the commercial exploitation of IP Thelast 33 chapters cover the international aspects of thesecuritization of IP in so many countries (Boer 1999)

With regard to the protection of IP on the Internet seealso the document published by the US Copyright Office(2003) and a web lsquolsquocrash coursersquorsquo provided by theUniversity of Texas (2003) The lsquolsquodigital professorrsquorsquo websitecreated by Professor Michael Rappa provides coursematerial on managing the digital enterprise that includesseveral sections and references on IP-related issues (Digitalprofessor 2003)

These texts and sources are mostly of a practical natureThey do not address the fundamental dilemma that thedigital revolution created for the protection of IP Thedilemma is caused on the one hand by the existence of theWorld Wide Web and the progress in digital technologyand the IP law on the other hand The report by theCommittee on Intellectual Property Rights and theEmerging Information Infrastructure of the NationalResearch Council The Digital DilemmamdashIntellectual

Property in the Information Age (2000) recognized thatgiven the multitude of possible IP business models legalmechanisms and technical protection services a one-size-fits-all solution to the dilemma would be too rigid TheCommittee recommended that lsquolsquoLegislators should notcontemplate an overhaul of IP laws and public policy atthis time to permit the evolutionary process (describedabove) to play outrsquorsquo

6 The use of IPRs by size and ownership of firms

Practically all empirical studies indicate that small andmedium-sized firms do not use IPRs in the same way aslarger firms Among the latter the MNC stand outTherefore below I survey first the findings related to smallfirms and then those concerned with large MNC

45The comparison with the situation in the US is sometimes difficult

because the definition of SME in the US and in Canada is not necessarily

the same46The comparison with the situation in the US is sometimes difficult


the same

61 Small and medium-sized firms

The contribution of small and medium-sized enterprises(SME) to innovation technological progress and economicgrowth in the US has been well documented Small firmsalso have higher patenting rates than the larger ones whenmeasured on a per-employee basis (Audretsch 2002Himmelberg and Petersen 1994) In contrast larger firmsproduce more patents per firm

To assist SMEs to appreciate the importance of IPprotection and to learn to use it WIPO has created a usefulspecial websitemdashlsquolsquoguidersquorsquo on IP for SME (see WIPO 2003)Changes to the patent system may have undesirable

effects on SME The American Inventors Act passed by theCongress in 1999 requires that all patent applications inthe US and abroad be disclosed to the public 18 monthsfrom the earliest filing date In a signed public letter 26Nobel Prize winners warned that smaller inventors may bedisadvantaged by having to expose the details of theirinventions before the patents have been granted (Gallini2002)In Canada Japan and Europe SME45 are less inclined

to patent than larger corporations However results from asurvey of British firms suggest that smaller firms were morethan proportionally active in acquiring IPRs assets (Green-halgh et al 2001) The evidence for Canada also showsthat the propensity to use any and all IPRs increases withthe size of firm (Baldwin and Hanel 2003) In contrast toSMEs which patent mostly only in Canada the largestfirms tend to patent both in Canada and the US (Hanel2003)According to evidence regarding small and medium-

sized firms in Europe the cost of obtaining a patent andthe prospect of even larger litigation costs (Bouju 1991)discourage small firms from patenting especially in othercountries (Tager and von Witzleben 1991) The samereport also contains an insightful discussion of licensingstrategies by a small firm supported by the example of anIrish company producing plastic products (Comerford1991 Kreikenbohm 1991)Regression results by Arundel and Kabla (1998) that

control for the effect of industry sector on patent ratesshow that patent propensity rates increase with firm sizeand are higher among firms that find patents to be animportant method for preventing competitors from copy-ing both product and process innovations (Arundel 2001)found that firms of all sizes consider secrecy to be a moreeffective means of appropriation than patents but thatsmall firms value secrecy more than large firms Thepreference of small companies for secrecy is presumablydue to their lack of financial resources needed to protecttheir patents from infringementThus the evidence from Canada Japan and Europe

suggests that SMEs46 are less inclined to patent than largercorporations However results from a survey of Britishfirms suggest that smaller firms were more than propor-tionally active in acquiring IPRs assets It may benoteworthy that the UK patent office has in recent yearsreduced the application fees for patent and trademarks(Burge 1999) it remains to be established whether or not


the reduced fees were behind the increased application ratein the UK (Greenhalgh et al 2001)

A more recent sector specific survey of Europeanbiotechnological firms shows that small firms use secrecymore than large ones Italian firms most and British leastfrequently Small firms tend more to use the nationalpatent systems the larger ones the European Patent Treaty(EPT) and even more often the Patent Cooperation Treaty(PCT)

Small firms are less involved in litigation (19)compared to (68) of large firms The typical cost perpatent including the cost of the attorney services and thefees is 2500 euro (attorney+fees) as reported by Thumm(2000) The detailed analysis of the company size distribu-tion of RampD and patent applications at different patentoffices by Licht and Zoz (1998) shows that the share ofRampD performing companies strictly increases with the sizeof the company The share of firms applying for patentsshows an even steeper increase with firm size Moreoverlarge firms are more likely to apply for patents in morethan one country The home patent office appearsespecially important for small firms A similar finding forCanada also shows that SMEs patent mostly in Canadaonly In contrast the largest firms and those firms thatpatent massively tend to patent both in Canada and the US(Hanel 2003)

Findings of a survey of 600 SME from all EU stateswhich obtained a European or US patent between 1994and 1997 conducted by University of Dublin found that

Two-thirds of the sample firms had experiencedattempts to copy their patented inventions but onlyone in five actually used courts to defend their patents

For 49 of the firms fear of cost of patent defense

litigation had a lsquolsquovery bigrsquorsquo or a lsquolsquosignificantrsquorsquo impact ontheir investment in invention

The current patent system works poorly for SMEs

especially in the US where large companies use theirsubstantial available resources to intimidate SMEs

For SMEs patenting is currently not cost-effective as a

means of protecting IP

Only in very rare cases are penalties for infringement

awarded in practice

47They tend also to use more frequently patents but the regression

coefficient of the patent variable is statistically significant at 12 level

only48The strength of IPRs in developing countries is assessed by Lall and

Albaladejo (2002)

Compulsory expert arbitration should be investigated asa solution to the excessive cost of patent litigation

For information on the use of IP by Australian SMEssee New Focus Research Pty Ltd (2000) introduced above

62 Use of IPRs by multinational firms

Owing to their proprietary advantages in research anddevelopment and innovation MNC are naturally very keento protect their IP effectively The multinational lobby wasbehind the modification of drug patent legislation inCanada (Doern and Sharaput 2000) and the inclusion oftrade-related intellectual property rules (TRIPS) in the last

round of GATT negotiations that created the World TradeOrganizationWhen the higher propensity to conduct RampD and the

larger size of foreign-owned firms in Canada are taken intoaccount these firms are not very different from thedomestic firms in terms of their use of IPRs The onlyclear-cut difference is that foreign-owned firms use trade-marks more frequently than their Canadian-owned coun-terparts (Baldwin and Hanel 2003)47

There are many recent studies documenting that MNCare disproportionably active in RampD intensive industriesand are using IPRs intensively (Guellec and van Pottels-berghe de la Potterie 2001 Cincera 2001 Mayer andPfister 2001 Archibugi and Iammarino 2002 Smith2001 Cantwell and Santangelo 2000)The description of the corporate IP infrastructure and

patenting strategies of the Belgian multinational SocieteSolvey amp Cie Strategic shows how the MNC choosesamong a defensive a barrier or bargaining strategy andthe options (1) to file first or (2) to study first to determinethe deciding factors for the protection of innovations(Hermans 1991) For the licensing strategies by multi-national firms see Sandri (1991) The experience oflicensing in and out by the Italian MNC Fiatmdashlicensingagreements with US German French and especiallylicensing to Soviet bloc countriesmdashis described by Sani(1991)One of the strong arguments advanced for the introduc-

tion of global standards for IPRs protection by TRIPS isbased on the hypothesis that the transfer of technology byMNC towards LDC is hampered by weak or non-existantprotection of IPRs in LDC48 The survey of MNC givessome empirical support to this hypothesis (Mansfield 1994Lee and Mansfield 1996) Representatives of a sample ofUS MNC were asked to indicate how the strength of IPRsin a given foreign country and industry sector is likely toinfluence their decision to invest there As hypothesizedMNC were less likely to be willing to invest in countrieswith a weak IPR record The relationship also reflectedinter-industry differences in effectiveness of IPRs protec-tion Further research along these lines by Kumar (1996)suggests that US MNC prefer to locate their RampDactivities in countries that are able to offer them amongother things larger markets technological resources andan infrastructure Host market-oriented affiliates are morelikely to have RampD units than the export-oriented onesespecially in developing countriesThe relative strength of the patent regime appears to

affect the direction rather than the magnitude of RampDinvestments made in a country Seyoum (1996) usesempirical findings based on a study of 27 countries They


support the proposition that the level of IP rightsprotection is a strong determinant of inward investmentand that IP rights have a greater impact on inwardinvestment than many economic policy variables amongcertain country groups According to Ostergard (2000)prior measures of IP strength lack a component thataddresses the actual enforcement of these laws Hismeasure uses three types of IPR laws and enforcementcomponents for them

It should be noted however that in several newlyindustrializing countries Brazil Turkey and Mexico toname only few the absence of patent protection has notprevented multinational pharmaceutical firms from enter-ing the local market and ensuring the firms an importantmarket share Strong brand promotion and productdifferentiation of drugs played a more significant role inappropriating returns than did IPRs (Zuniga and Combe2001)

Membership in IP treaties increases the flow of paymentsand receipts for IP as long as domestic patent protection issufficiently strong US parents export more to subsidiariesin countries that do not adhere to such treaties but theirimpact on armsrsquo length exports and foreign investment isminimal (Ferrantino 1993)

The Canadian experience points in the same directionCanadian firms also tend to export more to those countrieswhere their IPRs are highly safeguarded (Rafiquzzamanand Ghosh 2001)

7 IP strategies organization human resources and training

of IP personnel

71 IP strategies

The size organization and human resources dedicated tothe protection of IP are less frequently objects of inquiriesthan the use of IPRs and their effectiveness The classicalreference is Taylor and Silberston (1973) who surveyed theorganization size and cost of various functions of patentdepartments in UK firms

Comerford (1991) shows that SMEs benefit from variousforms of external assistance49 in the pursuit of theirlicensing strategies He illustrates the experience of a smallIrish firm Hermans (1991) presents the organization of theIP work in a large multinational European firm the SolvayGroup (Belgium) He discusses inter alia the use of secrecyas part of a patent strategy

IFOrsquos (Germany) research into cooperation betweencompanies in the European internal market shows thateach partnerrsquos patent portfolio and the accompanyingexclusive rights are the critical factors in RampD cooperationThe use of patents by both partners free of charge appearsonly at a later stage and is a sign that the cooperation isbased on trust The EU regulations on cooperationagreements provide companies with useful advice for

49The author mentions to have written a guide for licensing by SME

drawing up contracts The IFO survey has shown that ingeneral patents are given much lower value than othercompetitive instruments in the formulation of a companyrsquoscompetitive strategy Especially in consumer product firmsthe registered trademarks are considered to be a muchbetter instrument than patents (Oppenlander 1991) A lessfrequent arrangement is joint patenting by two or morecompanies Hagedoorn (2003)However when the research intensive firms have a

systematic patenting strategy patenting features promi-nently in their competitive outlook especially if com-petitors are likewise lsquoarmingrsquo their products with patentsAmerican and Japanese companies incorporate patentsmuch more into their competitive strategies than doEuropean companies There are large numbers of Japanesepatent applications at the German and other EPOssuggesting that patents are intended to put the com-petitive position of Japanese firms on a legal basisOppenlander (1991) recommends that firms should intro-duce training in patenting for their new engineers in orderto make them aware of the information available frompatentsJapanese corporations have integrated IP protection in

their innovation strategies The status and power of patentand IP departments have risen According to Granstrand(1999a b) Japanese corporations dedicate more resourcesto IP protection than most Western corporations do Theauthor presents the human resources in RampD and thepatenting divisions of several well-known Japanese firmsand their growth over the 1987ndash1992 period The chapteron IP organization and management includes a detailedaccount of organizational options for IP organization andmanagement The book also offers a detailed discussion ofpatenting strategies complete with flow charts and opera-tional detailsAnother study focusing on the Japanese management of

IP from a comparative perspective this time from the UKis by Pitkethly (2001) Based on extensive surveys ofJapanese and British patent departments the paper showsthe differences between the two countries in the size andstaffing of patent departments management attitudes to IPand licensing patent information management licensingrevenues etc

72 Human resources and their training

The need to create IP culture at the level of highereducation create teaching materials educate the broaderbusiness community and improve training in IPRs isemphasized in the recommendations of the EuropeanETAN expert working group (ETAN Expert WorkingGroup 1999)The Australian survey (New Focus Research Pty Ltd

2000) examined the awareness of firms of the importance ofIP and of the services of the patent office and their use Thereport contains the questionnaire and the tabulation of


responses with brief observations for

5

of

tec

pur

a sample of SMEs which go through patent attorneys

those which go directly through IP Australia

SMEs which do not use patents trademarks or designs

and also

large-scale enterprises LSEs

Responses are provided for each group on a wide rangeof issues Awareness of IP how IP is valued and under-

stood by users and non-users IPsrsquo importance andmethods of protection Reasons for IP use Use of patentoffice services attorneys and various media Training on IPissues Opportunities for IP Australia in the lifecycle ofdeveloping protecting and commercializing IP Barriers tothe use of IP Contacts with and delivery of services by IPAustralia The future role of IP Australia and top prioritiesfor readjustment to meet future needs

The services of national and international (European)patent offices are assessed from the point of view of apatent attorney by Bardehle (1991) The increasing trend topatent is stretching the resources of patent offices Anoriginal study by Adams et al (1997) shows that thedemand for the services of the US Patent Office can bepredicted rather well by an econometric model

8 The impact of IP on the value of the firm

Economists and business analysts working with stockmarket data endeavor to determine the effect of IPinstruments on the value of a firm There is a growingbody of literature covering various methodologies forassessing the economic value of IP rights and theirimpact on the value of the firm These are mostlyretrospective studies and are reviewed in this sectionMethods used to evaluate new technologies available forsale licensing or other means of extracting value from IPare presented in the next section devoted to the manage-ment of IP

There is a long tradition of using patent statistics aseconomic indicators Economists and students of techno-logical change have used patent statistics and patentinformation for various purposes The advantages andshortcomings of patent-based measures used as economicindicators have been frequently discussed in economic andbusiness literature the most authoritative survey of thisliterature well worth reading but too comprehensive toreview here is by Griliches (1990) See also a series ofempirical studies in Griliches (1984)

81 Economic value of patents

Only a subset of this literature50 is concerned with theeconomic value of patents According to Jaffe (2000)

0Patent counts are also used as indicators of innovation input or output

RampD indicators of technological competitiveness the rate of

hnological change and indicators of technology flows and for other

poses

studies that estimated the value of the patent right showthat it ranges from 5 to 10 of research spending insome industries to a high of up to 35 in other ones(Lanjouw et al 1998 Schankerman1998) According toGallini (2002) the value of patent protection estimatedfrom European patent renewal data and averaged overtechnological fields has been found to be 15ndash25 ofrelated RampD expenditures These modest estimates areconsistent with findings from surveys of innovating firmssuggesting that innovators do not consider patent protec-tion very effective in protecting the returns from innova-tions (Levin et al 1987 Cohen et al 2000 present theevidence for the US Baldwin and Hanel 2003 corroborateit for Canada)When research is sequential and builds upon previous

discoveries stronger protection may discourage subsequentresearch on valuable but potentially infringing follow-upinventions (Green and Scotchmer 1995 Merges andNelson 1990 Scotchmer 1996)Lerner (1994) examined the impact of patent scope on

firm value Using a sample of privately held venturecapital-backed biotechnology firms he shows that thebreadth of patent protection significantly affects valua-tions A one standard deviation increase in average patentscope is associated with a 21 increase in the firmrsquos valueBroad patents are more valuable when substitutes in thesame product class are plentiful a finding consistent withtheoretical suggestions The scientific merit of patentsalong with their number and RampD expenditures appear tobe patent characteristics that drive up the stock marketvalue of small and large firms Hirschey and Richardson(2004)The use of patents in economic research has been

seriously hindered by the fact that patents vary enormouslyin their importance or value and hence simple patentcounts may be misleading indicators of innovative outputAs shown by Trajtenberg (1990) patent counts weighed bycitations as indicators of the value of innovations overcomethe limitations of simple counts The market value of firmsis closely related to its knowledge assets and according toHall (1998a b) patent-based measures contain informa-tion about this value above and beyond that given by theRampD expenditures In the conclusion of her survey ofrecent findings in this field Hall indicates that patentcounts-weighted citations are overcoming the limitations ofsimple counts by improving the precision of the estimatedrelationship See also a recent study of the relationshipbetween backward citations of US patents and stockreturns by Fung (2003)

82 Accounting rules and value of IP

According to existing accounting rules the book value ofa firm does not include intangibles such as the value of IPThe value of the intangible assets (IA Reilly and Schweihs1998) of firms included in the Dow Jones Industrialaccounted for 43 versus 24 for the fixed assets in


1997 according to Bratic et al (2002)51 The phenomena ofthe rising value of intangibles and the role of IP in thelsquolsquoNewrsquorsquo economy was the subject of the BrookingsInstitution Study (2001)52 The growing gap between thevalue of a firm and the value of its fixed assets led Razgaitis(2002) to define the Old Economy as a system where thereis a direct measurable connection between the assets andincome The connection (correlation) between assets andvalue has changed radically in the last 20 years In the NewEconomy the price-to-book ratio increased notablysuggesting that the conventionally accounted assets nolonger represented the market value of a company Thecase study shows that Microsoftrsquos market value followsmuch closer the number of US patents issued to Microsoftthan the book value of its assets Thus the value oftechnology seems to be the missing component in the valueequation

Even though the stock market value of most knowledgeintensive firms has declined significantly since the 2000peak there still remains a significant gap between themarket value of most firms and the value of their tangibleassets For example the stock market value of Microsoft inSpring 2003 is far below its peak but still well above thebook value of its tangible assets

However the measure of the intangible capital ofsemiconductor firms based on citation-weighted patentsprovides according to Shane and Klock (1997) a bettermeasure than simple patent counts The study by Blundellet al (1999) examines the empirical relationship betweentechnological innovations market share and stock marketvalue The study finds a robust and positive effect ofmarket share on the observable headcount of innovationsand patents Another method for deriving the value ofpatents is based on patent renewal information (Lanjouwet al 1998) For the earliest studies of this type see Pakesand Schankerman (1984) and Pakes (1985)

A significant proportion of patented inventions is likelyto be used in industries other than the one to which theoriginal inventor andor owner of the patent belongs Forexample inventions patented by a chemical firm may beused in the pharmaceutical plastics or rubber industries Astudy of a large sample of major manufacturing firmsoperating in the US has shown that the patent-weightedRampD of upstream firms shows up in the increasedprofitability of downstream (user) firms (Hanel and St-Pierre 2002)53

51The value of knowledge-based firms is thus increasingly divorced from

their book value (value of their fixed assets) Financial data such as Tobin

q constructed from accounting data are therefore biased52Berman (2001 Chapter 4) presents an overview of the Brookings

study by Blair one of the authors of the study53The study used the PATDAT database developed by the Canadian

Patent Office PATDAT classified Canadian patents for new products and

processes according to the first three most likely industries of manufacture

and the three most likely industries of use of the patented invention This

database was unique of its kind and is being increasingly used in economic

and business researchmdashsee for example a special issue of Economic

System Research dealing completely with PATDAT based applications

The evidence on the growing gap between the value of afirm and its book value is not limited to the US Bosworthand Rogers (2001) investigate how RampD and IP activityinfluences the market value of Australian firms usingTobinrsquos q approach RampD data are available for the period1994ndash96 and data on patent trademark and designapplications for 1996 The findings suggest that RampDand patent activity are positively and significantly asso-ciated with market value The results also suggest thatprivate returns to RampD in Australia are low by interna-tional standards Hoshi and Kashyap (1990) examined theeffect of patenting on Tobin q in JapanTwo recent studies explored the IPmdasheconomic perfor-

mance nexus with German data The empirical analysis ofa sample of 49 manufacturers of machine tools shows astrong positive relationship between the market value ofthe firm and its patenting activities (Fleischer 1999)Holger (2001) analyzed a panel of 50 German machine toolmanufacturers and found that national patent applicationslead to sales increases with a time lag of 2ndash3 years after thepriority yearThe mean value of patents may not however represent

very informative statistics since the distribution of returnsfrom patents is very skewed According to Scherer andHarhoff (2000) the top 10 of their sample captured from48 to 93 of the total sample returnsPatenting is a distinctive feature of the patterns of

technological entry and exit across sectors and over time(Etemad and Seguin-Dulude 1986) Malerba and Orsenigo(1999) found that most of the entrants are occasionalinnovators while persistent innovators are few in numberbut large in terms of patentsPatents confer temporary monopoly power which may

be translated into higher prices Jones et al (2001) examinethe impact of the 1987 changes in the Canadian Patent Acton the pricing of ethical drugs From 1969 to 1987 Canadaopted to control pharmaceutical prices by using thecompulsory licensing provisions of the Act to promotecompetition between branded drugs and their genericequivalents In 1987 however the Act was amended toguarantee patent holders an extended period (7ndash10 years)of protection The major conclusions are despite evidenceof significant first-mover advantages which resulted inhigher brand prices competition from generics succeededin reducing overall market prices prior to 1987 but after1987 the efficacy of generic competition was reduced andboth brand and market prices increased This conclusion ishowever contradicted by earlier empirical studies reviewedby Frank and Salkever (1992) Their article suggests thatthe entry of generic competitors results in minimaldecreases or even increases in brand-name drug prices aswell as sharp declines in brand-name advertising

(footnote continued)

(Kortum and Putnam 1997) Unfortunately the PATDAT initiative has

fallen victim to budget cuts and has been discontinued in 1993


9 Management of intellectual property

With the understanding that in the New Economy theknowledge capital and not bricks or heavy machinery is theprincipal source of value the protection of IP acquired anew importance (see Granstrand (1999a b) for intellectualcapitalism Nonaka et al (2000) for firm as knowledgecreating entity and Prahalad and Hansel (1990) for the corecompetence of a corporation) Possessing promisingtechnology well-protected by appropriate IP instrumentshas become a necessary condition for attracting venturecapital accomplishing a successful initial public offering(IPO) and increasing the value and profits of establishedfirms

The management literature has added the managementof knowledge and intellectual capital to its popularsubjects There is an increasing number of referencematerials providing guidance to practitioners of IP andtechnology transfer54 They typically cover the wholedomain of IP management including the financial aspectsIn this section I review the most important recentcontributions to this fast-growing literature that deals withthe management of and strategies for IP protection Ioverview those that take a broader view and leave asidethose that deal only with legal issues

91 Assessing measuring and auditing IP portfolios

The growing interest in the management of IP hasresulted in efforts to improve its measurement IPperformance is now measured in ways other than simplepatent counts The emerging measures combine quantita-tive and qualitative aspects and enable organizations tobetter evaluate and manage their patent portfolios Bratic etal (2002)

Firms are performing IP lsquolsquobusinessrsquorsquo audits of their IP inorder to assess the commercial value and competitive use ofIP for their business The audit classifies IP into severalgroups It is the first step to creating an IP portfolio forstrategic purposes For example Dow Chemical which has29000 patents required each business unit to classify itspatents under three groups

(1)

54

man

(Ne

som

most valuable patents related to high growth business

(2)

patents that had no present or planned use but are still

of value to others and

(3)

patents unlikely to be used

The first group was left for business unit competitivepurposes the second offered for licensing and the third

There is also a growing literature on intellectual capital and its

agement which is more general in nature One of the most recent ones

rmien Al-Ali 2003) includes a chapter that provides basics on IP and

e aspects of its management

donated or abandoned (Nermien Al-Ali 2003) For a casestudy of Dow Chemical see Davis and Harrison (2001Chapter 6) Swycher (in Simensky et al 1999 Chapter 7)For the Australian point of view see Chrsquoang andYastreboff (2002)Identifying IP portfolio and mapping IP are of crucial

importance for licensing (Smith and Parr 1998 Chapters 2and 15) Fox and Kelley in Berman (2001 Chapter 9)present Hewlet-Packardrsquos approach on how to turnintellectual assets into business assets and how to manageinnovation and IP based on a marketing-centric strategy

92 Valuation of IP

One of the most important steps in managing IP is toestablish its value Valuation is the process of ascribingvalue to technology Valuation is particularly crucial forthe commercialization of early technologies for licensingand for mergers and acquisitions (MampA)Probably the best sources on the valuation of IP in

general are Razgaitis (2002) Smith and Parr (1998) andLamb in Simensky et al (1999 Chapter 5) and Damodoran(1994) According to Razgaitis the basis of valuation isrecognition that there are two concepts involved Technol-ogy and Right When these change the value changes aswell The principle valuation methods are

1

Industry standards (key is finding an appropriatebenchmark)

2

Rules of thumb (25 rule and many variants thereof)

3

Rating-Ranking

4

Discounted cash flow

5

Advanced methods (Monte Carlo Real options pricing

(for details see authorrsquos book Early Stage TechnologiesValuation and Pricing)

6

Auctions

Razgaitis recommends using multiple methods of valua-tion Multiple methods produce value or a coherent rangeof values that make sense from those multiple perspectivesThe valuation of early technologies presents specific

challenges as evidenced by the dotcom and telecom bubbleof the late 1990s This lends a special interest to the bookon valuation of early technologies published at the peak ofthe stock market frenzy (Razgaitis 1999 Smith and Parr1998 Chapter 10) The study of a sample of 127semiconductor patents suggests that for patents used aslsquolsquobargaining chipsrsquorsquo novelty and inventive activity are themost important determinants of the value of patent rightsIn a series of related papers Reitzig (2003 2004a b)estimated the value of patent lsquopoolsrsquo patent lsquofencesrsquo andpatent lsquothicketsrsquo of a sample of 612 European patents andfound that the value depends on the type of patentedtechnology (discrete or complex)The valuation of IP is also particularly important in

MampA On the valuation of brands in MampA see Forbes(2000) The role of IP in MampA is especially important in


information technologies (Rivette and Klein 2000) Acomprehensive treatment of IP in MampA is presented byBryer and Lebson on the WIPO (2003) Internet site

The valuation of patents when included in an industrystandard should take into account the value conferred bythe patented invention and the value attributable to thestandard (Patterson 2002) Smith (1997) treats valuationof trademarks

Intellectual property protection is also a significantfactor in strategic alliances Firms adopt more hierarchicalgovernance modes when protection is weak (Oxley 1999)Patent citation data are used to measure lsquotechnologicaloverlaprsquo between firms before and after alliance formationPartner selection can be predicted by measures oftechnological overlap and once formed alliances appearto affect the technological portfolios of firms in wayspredicted by the resource-based view (Mowery et al 1998)

Under some circumstances the value of corporationsrsquointellectual capital (protected or not) is maximized by thestrategy of corporate lsquolsquocarve-outsrsquorsquo A corporate carve-outoccurs when a company itself desires to hold the intellectualassets of its business in two or more sister companies Incontrast to a corporate spin-out (or spin-off) whose shares aredistributed to existing shareholders a carve-out establishes anew set of shareholders The chapter by Malackowski andHarrison in Goldscheider (2002 Chapter 13) describes indetail the reasons for carve-outs the criteria to be used inevaluating the intellectual capital for carve-outs the selectionof potential partners and how the carve-out should bestructured See also Zack (2001) on how to restructuretechnology rich companies

The joint venture IP strategies and special problems withStrategic Alliances are described by Smith and Parr (1998Chapters 13 and 14)

93 Managing of IP assets

The evidence of corporations being increasingly capableof extracting value from intellectual assets is provided bythe growing importance of licensing This increase inimportance had according to Manfroy (2002) the follow-ing consequences

(1)

Corporate vision changed and many corporationscreated the position of Chief Technology Officer

(2)

Emergence of the Intellectual Capital Model A modelof a company from the intellectual assets perspectivethat explains how the different pieces of a corporationfall together how they interrelate and their impact on acorporationrsquos intellectual assets and profitability

(3)

Attention is given to intellectual assets management

(4)

With the increasing importance of intellectual assets

licensing professionals are demanding increased remu-neration

The various aspects of best licensing practices arepresented in a collective volume edited by Goldscheider

(2002) in Goldscheider (1998) and UNIDO (1996)Although the present survey does not provide an overview of the legal aspects of IP management I wish to drawattention to the chapter on the lsquoDos and Donrsquots of licensingagreements It is a very useful guide that should helpmanagers and legal councils interact better in theirendeavors to write precise but comprehensive legal agree-ments (Ramsay 2002)Licensing increasingly involves a combination of patents

trade secrets and copyrights in the realm of software andthe Internet (see respectively Jagerrsquos Chapter 6 andLechterrsquos Chapter 7 in Goldscheider 2002) Trademarkprotection and licensing from the US and Canadianperspectives are treated in Small and McKayrsquos Chapter 8Positioning IP for share holderrsquos value through lsquolsquoPatent

Brandsrsquorsquo is discussed by Berman and Woods in Berman(2001 Chapter 10) One of the companies whose value isbased on several worldrsquos most valuable brands is Proctor ampGamble Weedman in Berman (2001 Chapter 11) describeshow the IP portfolio is managed and exploited by Proctoramp GambleSmith and Parr (1998) present a Strategic IP plan and

Gap analysis illustrated by case studies of Merck andDupont The best intellectual capital management practicesof a group of about 30 leading companies are the rawmaterial from which Davis and Harrison (2001) distilledthe patterns that characterize some of the activities leading-edge companies use to realize value from their intellectualcapital and property Rivette and Kleinrsquos (2000) book isfull of examples of how the high tech firms in informationtechnology industries extract value from their knowledgeassets They propose a three-pronged patent strategy forlarge RampD projects (Knight 2001)

94 Accounting and IP

The American Institute of Certified Public Accountants(AICPA) has been requiring all companiesmdashprivate andpublicmdashto disclose certain risks and uncertainties thatcould affect their financial performance effective for fiscalyears ending after December 15 1995 The new require-ment known as Statement of Position (SOP) 94-6lsquolsquoDisclosure of Certain Significant Risks and Uncertain-tiesrsquorsquo challenges senior managers of businesses to find anappropriate balance between complying with new disclo-sure guidelines and guarding their own competitivepositions and trade secrets (Kwestel and Nusbaum1996) However this measure did not prevent the financialscandals that marked the end of the 1990sIn June 2001 the Financial Accounting Standards Board

of the US introduced new Financial Accounting Standards(FAS 142) Goodwill and Other IA that requiredsignificant changes in how companies record the value oftheir IP As stated by Baruch (2001) who was on thecommittee lsquolsquoFor the most successful companies patentscopyrights brands and other IA trump physical assetssuch as factories offices and even product inventory hands

ARTICLE IN PRESS

55See Bouju (1991) on litigation costs


downrsquorsquo In May 2001 the Securities and ExchangeCommission Chairman recommended that the SEC en-courage supplemental reporting by corporations on suchassets Kossovsky and Brandegee (Goldscheider 2002Chapter 12) show how firms respond to these new rules byintegrating IP management strategies into corporatefinancial strategy

The framework for auditing intellectual capital (see alsothe section on IP portfolios above) uses different methodsThe comparison of their effectiveness is found in Abeyse-kera (2001) Many larger IP agent and attorney firmspropose one model of IP audit or another eg see thewebsite of Bereskin amp Parr Toronto Ont wwwbereskin-parrcom which offers a series of IP management relatedtexts articles and guides written by the firmrsquos IP profes-sionals (Rudolph see also Aylen 2001)

Financial accounting and reporting considerations arealso covered by Carter and Lasinski in Simensky et al(1999 Chapter 8)

One particularly sensitive issue in the era of precipitatingtechnological change is the obsolescence of new technol-ogies and their fiscal treatment Amortization of IP for USFederal income taxes is the subject of Gehanrsquos chapter inSimensky et al (1999 Chapter 9) Patent renewal data wereused by Bosworth and Jobome (2003) to estimate the rateof depreciation of technological knowledge

Global exploitation of IP creates special accounting andfiscal issues especially for joint ventures The rulesconstraints and methods of dealing with them arepresented in Smith and Parr (1998 Chapter 14) Baum-garten et al (1995) look at fiscal aspects of softwaretransactions

95 IP as financial asset

IP assets are increasingly integrated into a corporationrsquosfinancial strategy IP is leveraged in investment bankingtransactions (see Lamb in Simensky et al (1999 Chapter5) As IP assets are used increasingly by corporations asfinancial assets their value is also assessed by ratingagencies (see for details Hoens in Simensky et al 1999Chapter 10)

IP management as a financial asset draws its approachesfrom financial management One of the more sophisticatedapproaches is the application of the options pricing theoryto IP presented in Bermanrsquos (2001 Chapter 5) by ArrowHe presents the pros and cons of the options approachSchwartz (2004) develops and implements a simulationapproach to value pharmaceutical patents and patent-protected RampD projects based on the real optionsapproach The options approach is also exposed inRazgaitis (2002) The interplay of risk and reward involvedin inventing is closely related to a similar interplay ininvesting Jorasch (in Bermanrsquos (2001 Chapter 6) developsthe concept of business-driven inventing a process whichstarts by identifying what the market wants and then findsa unique (perhaps patentable) solution to fill the need The

chapter is illustrated with examples from several industries(a pharmaceutical company a firm developing businesssolutions a casino slot machine company) The relation-ship between IP and venture capital financing is the topic ofMalackowski and Wakefieldrsquos chapter lsquolsquoVenture Invest-ment Grounded in Intellectual Capitalrsquorsquo in Berman (2001)Securitization of IP ie using IP instruments to se-

cure financing is one of the latest manifestations oflsquolsquointellectual capitalismrsquorsquo Several subjects Financing IProyalties Credit analysis of Intellectual Property Secur-itization Asset-based IP financing Relevance of IP inMampA and Patents on Wall Street are described in the lastsection of Berman (2001) The taking of security interests inIA must conform to international laws and comply withnational statutes Simensky et al (1999) present thesituation in 33 countries including Canada (Chapter 33by Wall)

10 Enforcement of IPRs infringement and dispute

resolution

101 Litigation

The increase in patenting in the US has inevitably led toan increasing trend in litigation The number of patentcases filed before the US Federal courts climbed steadilyfrom 1178 in 1991 through 1723 in 1995 to 2484 in 2000The number of terminated cases has also been increasingbut less rapidly Therefore the number of pending casesbefore the courts has been steadily increasing (Prakash2001)Does the cost of enforcing patent rights significantly

reduce the value of patents as an innovation incentiveDoes the risk of patent litigation from other parties reducethe incentive to engage in innovation even where theincentive is not to infringe The early economic literaturefocused on the relationship of litigation and a firmrsquosbehavior It found that as the cost of litigation55 increasesthe potential injurer exercises greater caution to avoidinjuries and litigation (Cooter 1989 Lerner 1995) foundthat firms with high litigation costs are less likely to patentin patent classes with many previous awards by rival firmsand they tend to avoid those classes occupied by rivals thatthemselves have low litigation costs Lanjouw and Schan-kerman (1997) show that patents that are litigated tend tohave more claims and more citations per claim Theyinterpret this to mean that litigation is more likely when apatent is part of a stream of related development work asevidenced by the number of citations received from thesubsequent patents on related technologies owned by thesame firmIn an overview of the empirical literature on the

enforcement of IPRs Lanjouw and Lerner (1998) examineseveral recent avenues of empirical research into theenforcement of IP rights Jaffe (2000) concludes that the

ARTICLE IN PRESS

56Reback has been named one of the lsquolsquo100 most Influential Lawyers in

Americarsquorsquo by the National Law Journal His clients have included Sun

Microsystems Netscape Oracle Apple Borland and Novell He also

spearheaded the assault to break up Microsoftrsquos operating system

monopoly


evidence suggests that the perceived danger of patentlitigation does affect the research decisions of firms andaffects those decisions depending on the firmsrsquo abilities toengage in litigation For more on litigation see Lanjouwand Schankerman (1997 2001) Lanjouw and Lerner(2001) Granstrand (1999a b) Moore (2000) Kingston(1995 2001) a handbook by Parr (1999) Sherry andTeece (2004) found that a proven-valid-and-infringedpatent is a more valuable asset than an untested patentThe legal and economic aspects of lsquolsquogray market goodsrsquorsquoie goods infringing IP laws are treated by Lipner (1990)The cost of trade secret theft is the subject of Fryrsquos (2001)article

The value of patent rights is one of the most importantelements of litigation Lanjouw et al (1998) derivedempirical estimates of the private value of patent protec-tion for four technology areasmdashcomputers textilescombustion engines and pharmaceuticalsmdashusing newpatent data for West Germany for the 1953ndash1988 periodPatentees must pay renewal fees to keep their patents inforce as well as legal expenses in order to enforce themResults indicate that the aggregate value of protectiongenerated per year is in the order of 10 of related RampDexpenditure

Firm-specific wealth effects associated with US Interna-tional Trade Commission Section 337 investigations of IPright infringements are estimated by Harper (1994) Amajor finding is that the Section 337 protection is valuableto complainant firms but the timing of wealth effectssuggests differing motivations for firms which pursue thisremedy Other findings are that firms involved in con-current District Court litigation and firms with a greaternumber of respondents are less likely to settle their caseprior to an ITC determination Recent statutory changes inSection 337 also appear to have increased complainantfirmsrsquo incentives to settle

Litigation is costly By reducing the residual value of apatent the process of enforcing patent rights reduces anddistorts RampD incentives Lanjouw and Schankerman(1997) came to this conclusion after analyzing a largesample of patent filings from the US district court linkedwith the detailed patent data from the USPTO There areabout 11 suits per 1000 patents There is a positiveassociation between the value of patent rights and theexpected legal cost of enforcing them Patentees are morelikely to sue when they have subsequent inventions in thesame technology area The highest incidence of litigation isin biotechnology followed by pharmaceuticals that have arate of litigation twice as high as the overall industryaverage

Since litigation is very costly it is advisable to avoidit Foster (2002) describes the steps to take when afirm suspects that its IPRs are being infringed The IPguides also offer advice on what to do in case ofinfringement and how to avoid costly litigation in patentlicensing (Goldscheider 2002 Chapters 14 and 15) and intrademarks (Shilling 2002) Patents for new business

models that use the Internet and their infringement arethe subject of a chapter in Rivette and Klein (2000) Forenforcement of patented business methods see Kang andSnyder (2000)

102 Examples of Internet and computer infringement of IP

With globalization and in spite of efforts such as TRIPSto standardize IP protection internationally the effective-ness of IP protection varies from country to country Lamband Rosen (in Simensky et al 1999 Chapter 11) look atglobal piracy and its effect on the valuation of IPIndustrial espionage or the covert theft of confidentialinformation has increased more than 300 since 1992Losses exceeded $15 billion in 1995 The dangers ofindustrial espionage that often focuses on the main items ofa firmrsquos IP and the means of protection are discussed byGreenlee (1996)Although software piracy is often described as a threat

to innovation only a minority of publishers have chosen toadopt hardware keys the most secure technology protect-ing IP in software A survey of German software publi-shers reveals that they demand different levels of costlysecurity depending on product characteristics and marketsserved Since public protection incurs costs of its owninitiatives to strengthen IP rights in software and theirofficial enforcement should take into account empiricalevidence about private willingness to pay for protection(Stolpe 2000)Internet marketing has also brought new risks such as

lsquolsquocybersquattingrsquorsquo in which an individual registers thedomain name of a company and attempts to sell thedomain name to the company However a federal trade-mark registration based on an application filed before theapplication to register a domain name is a basis forunseating cybersquattersRecently signed legislation provides a remedy for

lsquolsquocyberpiracyrsquorsquo It creates an action against anyone whowith a bad faith intent to profit registers traffics in or usesa domain name that is (1) identical or confusingly similarto a mark that was distinctive when the domain name wasregistered or (2) identical or confusingly similar to ordilutive of a mark that was famous when the domain namewas registered (Foudree and Trzyna 1999)A brief description of RampD and IP strategies pursued by

Gillette to fend off imitators by Galarza (1996) shows thatthe company is protective of its product line to the point oflitigation where appropriateSee also the article written by Reback (2002)56 The

article criticizes the recent lsquolsquopro-patent changesrsquorsquo intro-duced by the US Patent and Trademark Office


Recently economists in particular have started toquestion the USPTO practices finding little correlationif any between patent proliferation and invention If thesystem is to be fixed the USPTO needs to focus on theeconomic costs of its policies and correct its own balancesheet The Internet domain is increasingly misused andabused The World Intellectual Property Organization(WIPO) stripping cybersquatter Kenneth Harvey of thedomain walmartcanadacom is an example of the difficultrelationship between Internet domains and fair trademarkprotection (Libin October 16 2000) The Internet isopening new opportunities for legal attacks Goldsboroughoffers some commonsense advice to avoid having to appearin court with particular regard to libel copyright andtrademarks (Goldsborough 2001) Many agencies includ-ing the Federal Trade Commission and the US Departmentof Transportation have been regulating Internet advertis-ing For example the FTC has filed actions against Website owners for violations of the Mail and Telephone OrderMerchandise Rules Actions also have been filed by theSecurities and Exchange Commission when Web siteowners failed to comply with laws requiring companies tohave prospectuses (Lans-Retsky 1997)

As the sheer volume of Web addresses grows so does thelikelihood of confusion between similar domain namesmdashand of legal disputes The procedures for resolving suchdifferences are through the dispute resolution processavailable from the Internet Corp for Assigned Namesand Numbers (ICANN) or in the courts The criticaldifference between ICANNs dispute service providers andthe US court system is the ability to seek financialrestitution A company could lose substantial revenues ifits trademark has been seriously diluted and while ICANNcan make the offender give up the domain name inquestion it is not empowered to force defendants to payany compensation On the other hand unless monetarydamages are substantial and provable ICANNs speed andefficiency often make it the venue of choice (Jarvis 2000)

Description of the litigation and patent enforcementregarding computerized phone services is based in part onKatzrsquos patents on forms of interactive technology rangingfrom phone-sex lines to telephone database retrieval Thecase illustrates the possibility of an independent inventorwinning over the large and powerful firms Katzrsquosdetractors say he is not an inventor as much as an exploiterof the US Patent amp Trademark Office (Lubove 1997)

Innovation related to the Internet has been characterizedby two opposite attitudes to IP On the one hand someinnovating firms realized the potential patents offer tosecure and defend a profitable position in the e-commerceeconomy and therefore they patent intensively57 On theother hand the Internet is also the medium which saw theemergence of the Open Source Initiativemdasha loose group ofvolunteer programmers who collaborate to develop free

57The number of US Internet patents jumped by 300 from 1997 to

1998 (2193 patents issued in 1998) according to Rivette and Klein (2000)

software for the Internet The clash between those twoattitudes and the patent wars related to the Internet arewell described in Rivette and Klein (2000) As with manyother texts in this section theirs was written before thestock market fall which makes it more interesting if lessinformative reading today

103 Insurance

The use of insurance as a protection for legal costsincurred as a result of IPRs litigation has been common inthe UK since 1974 At the beginning of the 1990s therewere indications that the practice may be extended to theEEC and elsewhere (Raincock 1991) Websites of privatepatent attorneys and technology and IP licensing servicefirms sometimes list infringement insurance among theservices offered eg Patent cafe (www2xfrcomresource-sasp) See also a brief mention of the patent insurance inBreese (2002) and a chapter in Goldscheider (2002 Chapter12)An optimal management of IP has to take into

consideration fiscal constraints and opportunities as wellas the legal risks and opportunities Chestek (2001) showsthat in some situations it may be advantageous from afiscal and legal point of view for a corporation to insulatefrom lawsuits and prosecution regarding IP by creating anIntellectual Property holding company The managementof IP risk and insurance coverage of IP transactions aredealt with by Simensky and Osterberg in Simensky et al(1999 Chapter 22) and earlier by Stanzler (1993)Intellectual Property Wales (2003) published a veryinteresting study of Intellectual Property and LegalExpense Insurance based on a vast survey of SMEs inthe UK (Beynon Kerry et al 2003)When the worst comes and a firm goes bankrupt what

if anything can be done with IP Treatment of IP inbankrupcy is the subject of Goldman and Klinkrsquos chapterin Simensky et al (1999 Chapter 22)

11 Summary

With the increasing economic importance of knowledgeit is not surprising that IP in general and patents inparticular are an increasingly valued business assetThe present overview starts with a brief description of

developments that led to a lsquolsquopatent friendlyrsquorsquo era in the USThe introduction of the Court of Appeals for the FederalCircuit in the US improved the probability that in cases ofpatent litigation patenteesrsquo rights will be upheld The realmof what can be patented and the scope of patents have beenexpanded the criteria of patentability according to someauthors relaxed The Bayh-Dole act made it possible topatent inventions arising from publicly funded researchThese institutional changes and increased funding andfocus on RampD are believed to be behind the significantincrease of patenting by US universities and publiclaboratories Several authors question the contribution of


the patent friendly era to scientific advance innovation andtechnological progress

A series of studies demonstrates that even thoughpatents are increasingly perceived in many industrialsectors as being a rather ineffectual means of appropriatingeconomic benefits from innovations patenting has surgedThe explanation for this apparent contradiction is thatpatents are increasingly being used to block competitorsrsquoproducts as bargaining chips in cross-licensing and as aprevention or a defence against infringement suits On theone hand these trends have led several economists toquestion the basic premise of patentsrsquo contribution toinnovation and diffusion of new technology On the otherhand economistsrsquo doubt not withstanding protection andthe strategic use of IP in general and patents in particularare extolled by an increasing number of popular businessbooks

Examples from the US show that the way patents areused depends not only on whether the technology islsquodiscretersquo or lsquocomplexrsquo but also on an industryrsquos compe-titive structure Similar structural characteristics of patent-ing also exist in Europe and in Canada Studies of the useof patenting and other legal instruments of IP protection inCanada also show an increase in patenting albeit with acertain time lag behind the US trend In comparison withthe US European firms tend to have a lower propensity topatent This is attributed to the higher cost of patenting asystem of IPR not well adapted to new technologies lackof harmonization of national patent systems and acondescending attitude of European technicians towardsminor lsquo junkrsquo patents

Until 1988 the Japanese patent system was characterizedby a single claim per patent which obviously inflated thenumber of patents per invention However even thoughJapan introduced the multi-claim system similar to that usedby other industrial countries the number of patentapplications in Japan as in the US has increaseddramatically since the 1980s The rules of disclosure inJapan ensure that patent applications are published within18 months after filing This and the generally weakerprotection provided by the patent system in Japan arebelieved to favor cooperation between firms and diffusion ofinnovations However in comparison with the US theJapanese patent system is seen as not favouring collabora-tion between industry and universities (Matutes et al 1996)

It is well known that industries differ in their use of IPprotection In industries with lsquodiscrete technologiesrsquo such asthe production of chemicals or pharmaceuticals IPRsdefine rights over a specific product or processes categoryand protect them against imitation more effectively than inother fields The patenting strategy in lsquodiscrete technolo-giesrsquo is to build patent fences around a core inventionpatent to foreclose patenting by rivals In these industriespatented inventions are easily licensed but rarely cross-licensed

In contrast cross-licensing is characteristic of complextechnologies (eg semiconductors information and tele-

communication technologies) In these industries patentsare not considered to provide effective protection againstimitation They are increasingly used as part of a businessstrategy based on an accumulation of large patentportfolios used as bargaining chips in cross-licensing toprotect innovative firms against infringement suits andgenerate royalty revenuesPatent protection in the US has been periodically

extended to cover new subject matter Software wasinitially protected by copyright With the arrival ofpersonal computers the explosive growth of the softwareindustry and the Internet the US Patent Office started toaccept patents for software then for business methods andlately for Internet-related business practices such as on-lineauctioning on-line investing e-commerce etc In contrastpatenting business methods in the UK and by the EPO isstill relatively rare The broader IPR-related questionsregarding the Internet are being intensively studied on bothsides of the AtlanticThe effective use of IPRs requires that they be well

incorporated into a firmrsquos overall strategy This is moreoften the case with large than with small firms Small firmsoften lack or cannot afford to build up specific compe-tencies They also lack the financial capability to defend theinfringed IPRs The cost of obtaining a patent and theprospect of even larger litigation costs often discouragessmall firms from patenting especially abroad Thusalthough small firms are often at the origin of the mostrevolutionary innovationsmdashin many countries JapanEurope and Canadamdashthey use IPRs less frequently thanthe large ones In the US small firms have larger patent peremployee ratio but large firms produce more patents perfirm In keeping with their lower rate of IP use small firmsresort more frequently to secrecy than large firmsAmong the large firms MNC are the most active users

and proponents of global standards for the protection ofIPRs Their lobbying culminated in the inclusion of thetrade related intellectual property rights (TRIPS) agree-ment in the WTOrsquos arsenal of trade disciplines The TRIPSagreement introduced on the insistence of the US andother industrial countries incorporated into the arsenal ofinternational trade rules an agreement imposing commonrules strengthening the protection of IP in all membercountries The argument in favour of extending amandatory inclusion of common TRIPS rules even to thepoorest LDC is based on the argumentmdashsupported byseveral studiesmdashthat the transfer of technology by MNC ishampered by weak or non-existant protection of IPRs inmany LDC The evidence is however not conclusive asother studies show that the absence of strong IPRsprotection in some emerging newly industrialized countriesdid not prevent pharmaceutical multinationals from enter-ing the local marketWith the increased attention to the specifics of what

creates sustains and advances firms in the knowledge-based economy attention turned to the size organizationand human resources dedicated to the protection of IP


Several studies show that the US and Japanese com-panies incorporate patents and other instruments of IPmuch more effectively in their competitive strategiesthan the European ones Japanese firms in particularallocate to IP more resources and integrate their manage-ment into their companiesrsquo competitive strategies The needto create an IP culture in the industry and the implicationsfor higher education training organization and manage-ment are now widely recognized The popular businessliterature on these aspects is more numerous than scientificstudies

The fast rise of the value of high-tech firms in the run-upto the late 1990s stock market bubble attracted attentionto the economic value of IPRs in general and of patentsin particular As in the effectiveness and use of IPRs thereare important inter-industry differences in the estimates ofthe economic value of patents According to severalstudies they range from 5 to 10 of research spendingin some industries to 35 in others The market value offirms is closely related to its knowledge assets The patent-based measures of a firmrsquos knowledge assets containinformation about the firm value above and beyond thatgiven by RampD expenditures The wider the breadth ofpatent scope the stronger the impact of patents on thevalue of the firm

One of the defining characteristics of the New orKnowledge-based Economy is the close correlation of themarket value of a firm and the value of its IA Increasinglythe market value of a firm especially in the knowledge-intensive industries is associated more closely with thenumber of patents it owns than with the value of itsphysical assets Even though the market value of mostknowledge intensive firms has sharply decreased from the2000 peak that market value is still well above the bookvalue of their assets The evidence of the gap between thevalue of the firm and the book value of its assets is notlimited to the US

The realization of the increased importance of IP rightsas a co-determinant of the market value of a firm has led toan increased interest in the management of IP Manage-ment literature has added the management of knowledgeand IP capital to its popular subjects To properly manageIP firms have to be able to measure and assess the value oftheir IP portfolios Several recently published managementbooks specialized in this subject show the practices of themost notorious large patenting firms The valuation of IP isparticularly important for IPOs for MampA of knowledgeintensive firms and for strategic alliances

Auditing their IP in order to determine its contributionto a firmrsquos value added and licensing patents know-howand brands not crucial for the firmrsquos core business enablethe extraction of more value from IP assets The casestudies and anecdotic evidence point to the increasingimportance of licensing There are a growing number ofmanagement texts instructing managers and legal councilhow to better interact with the management of IP and itslicensing

The increasingly important role of intellectual assetsposes a challenge to accounting In 2001 the FinancialAccounting Standards Board of the Unites States intro-duced new Financial Accounting Standards that broughtabout significant changes in how companies record thevalue of IP A particularly difficult issue in a period ofrapid technological change is the rate of obsolescence ofnew technologies and their fiscal treatment The presentsurvey lists several useful sources where these subjects aretreatedOne particularly interesting aspect of IP management is

drawn from an analogy of risk and rewards characterizingboth inventing and investing This led to the applicationand adaptation to IP of the financial theory of optionpricing Another spill-over from financial theory andpractice is the securitization of IP ie using IP instrumentsto secure financing This section of the survey is completedby a thorough overview of national regulations andinternational standards relative to the securitization of IPin 33 countriesThe last subject of the survey presents a series of studies

dealing with the business aspects of infringement of IPlitigation and dispute resolution Litigation is costly Itreduces the residual value of a patent as well as theenforcement of patent rights and it distorts RampDincentives There is evidence that as the risk of litigationincreases the potential injurer exercises greater caution toavoid infringement and litigation Depending on the firmrsquosabilities to engage in litigation the perceived danger ofpatent litigation affects its research decisions Sincelitigation is costly it is advisable to avoid it Several textsoffer advice about what to do when a firm suspects that itsIP rights have been infringed and how to avoid costlylitigation The specifics of IP infringement on the Internetare also dealt withOne way of reducing the legal costs involved in litigation

is to buy insurance against infringement Another is tocreate an Intellectual Property holding company When theworst happens and a firm goes bankrupt IP is one of theassets that have to be dealt with The treatment of IP inbankruptcy concludes the survey

Acknowledgments

Financing of the project by the Canadian IntellectualProperty Office is gratefully acknowledgedMy thanks to Mr Esteban Burrone (WIPO) Mrs Kerry

Beynon (IP Wales) and Mr Gary Lazarus (IndustryCanada) for information and to Mr Ely Hounzangbe forable assistance I alone remain responsible for the opinionsand remaining errors

References

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Knowledge Management Practice (August)


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Anderson RD Gallini NT (Eds) 1998 Competition Policy and

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Cincera M 2001 The determinants of patenting activities in Belgium are

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Applied Econometrics Association lsquoInnovations and Intellectual

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Cockburn I Lanjouw J 2000 Do patents matter Empirical evidence

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David PA 2000 A tragedy of the public knowledge lsquocommonsrsquo Global

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DEXhtml

Davis L 2004 Intellectual property rights strategy and policy

Economics of Innovation and New Technology 13 (5) 399ndash415

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Davis JL Harrison SS 2001 Edison in the Boardroom How Leading

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De Melto DP McMullen KE Wills RM 1980 Preliminary report

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Digital professor 2003 Managing The Digital Enterprise http

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Doern GB Sharaput M 2000 Canadian Intellectual Property The

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Collection International Library of Critical Writings in Economics

vol 117 Elgar Cheltenham UK and Northampton MA pp 357ndash411

(distributed by American International Distribution Corporation

Williston VT)

Elias S 2003 Trademarks Legal Care for Your Business amp Product

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ETAN Expert Working Group 1999 Strategic dimensions of intellectual

property rights in the context of science and technology policy Final

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Research and Development Directorate AP-Policy Co-ordination and

Strategy

Etemad H Seguin-Dulude L 1986 Patenting patterns in 25 multi-

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Multinational Subsidiary Response to Environmental Changes and to

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EPO 1994 Utilisation of Patent Protection in Europe European Patent

Office Munich

Ferrantino MJ 1993 The effect of intellectual property rights on

international trade and investment Weltwirtschaftliches Archiv 129

(2) 300ndash331

Firestone J 1971 Economic Implications of Patents University of

Ottawa

Fishman S 2002 The Copyright Handbook How to Protect amp Use

Written Works sixth ed Nolo Press New York

Fleischer M 1999 Innovation patenting and performance Economie

Appliquee 52 (2) 95ndash119

Forbes T 2000 The Increasing importance of intellectual Property in

MampA Brand Finance September

Foudree B Trzyna P 1999 Trade service marks domain names soar

National Underwriter 103 9ndash12

Foster J 2002 Your patent has been infringed-what to do Massachus-

sets High TechmdashThe Journal of New England Technology 20 (41)

wwwmasshightechcomS October 14ndash20

Frank R-G Salkever D-S 1992 Pricing patent loss and the

market for pharmaceuticals Southern Economic Journal 59 (2)

165ndash179

Friedman DD Landes WM Posner RA 1991 Some economics of

trade secret law Journal of Economic Perspectives 5 61ndash72

Fry JP 2001 Counting the cost of trade secret theft Managing

Intellectual Property London JulyAugust

Fung MK 2003 Technological proximity and co-movements of stock

returns Economics Letters 79 (1) 131ndash136 ISSN 0165-1765

Galarza P 1996 Shave and a lawsuity Financial World 165

Gallini NT 2002 The economics of patents lessons from recent US

patent reform Journal of Economic Perspectives 16 (2) 131ndash154

Gallini N Putnam J Tepperman A 2001 Intellectual property rights

and the propensity to patent In Industry Canada International

Conference on Intellectual Property and Innovation in the Knowledge-

Based Economy Toronto May

Gilbert R Shapiro C 1990 Optimal patent length and breadth RAND

Journal of Economics 21 106ndash112

Goldsborough R 2001 Warding off Internet legal woes Public

Relations Tactics Jul 8(7)

Ginarte JC Park WG 1997 Determinants of Patent Rights A Cross

National Study Research Policy 26 283ndash301

Goldscheider R 1998 Licensing-in a key to continued corporate health

The Journal of Law and Technology IDEA 38 361ndash382

Goldscheider R 2002 Licensing Best Practices Wiley New York

Goto A Odagiri H (Eds) 1997 Innovation in Japan Oxford

University Press Clarendon Press Oxford and New York viii 311pp

Graham S Mowery DC 2001 Intellectual property protection in the

US software industry In Industry Canada International Conference

on Intellectual Property and Innovation in the Knowledge-Based

Economy Toronto May

Granstrand O 1999a Internationalization of corporate RampD a study of

Japanese and Swedish corporations Research Policy 28 (2ndash3)

275ndash302

Granstrand O 1999b The Economics and Management of Intellectual

Property Towards Intellectual Capitalism Elgar Cheltenham UK

and Northampton MA xv 464pp (distributed by American Interna-

tional Distribution Corporation Williston VT)

Granstrand O 2000 The shift towards intellectual capitalismmdashthe role

of infocom technologies Research Policy 29 (9) 1061ndash1080

Green J Scotchmer S 1995 On the division of profit in sequential

innovation RAND Journal of Economics 26 20ndash33

Greenhalgh C Longland M 2002 Running to Stand Stillmdash

Intellectual Property and Value Added in Innovating Firms Oxford

Intellectual Property Research Centre wwwoiprcoxacuk

Greenhalgh C Longland M Bosworth D 2001 Protecting intellectual

property British European and American patents and trade marks of

selected UK companies 1986ndash95 Oxford Intellectual Property

Research Centre Electronic Journal of Intellectual Property Rights

httpwwwoiprcoxacukEJINDEXhtml

Greenlee JS 1996 Spies like them Management Accounting 78 31ndash32

Griliches Z 1984 RampD patents and productivity NBER

Griliches Z 1990 Patent statistics as economic indicators a survey

Journal of Economic Literature XXVIII (4) 1661ndash1707

Grindley P Teece DJ 1997 Managing intellectual capital licensing

and cross-licensing in semiconductors and electronic California

Management Review 39 1ndash34

Guellec D van Pottelsberghe de la Potterie B 2001 The internationa-

lisation of technology analysed with patent data Research Policy 30

(8) 1253ndash1266

Hagedoorn J 2003 Sharing intellectual property rightsmdashan exploratory

study of joint patenting amongst companies Industrial and Corporate

Change 12 (5) 1035ndash1050

Hall B 1998a Innovation and market value In Conference Innovation

Survey DataTSER Network on RampD Innovation and Productivity

Ministere de lrsquoindustrie Service des Statistiques Industrielles

Hall B 1998b Innovation and market value In Barrell R Mason G

(Eds) Productivity and Competitiveness Cambridge University Press

London

Hall B Ham-Ziedonis R 2001 The patent paradox revisited an

empirical study of patenting in the US semiconductor industry

1979ndash1995 RAND Journal of Economics 32 101ndash128

Ham RM Greg L Melissa M 1998 Appleyard The evolving role of

semiconductor consortia in the United States and Japan California

Management Review 41 (1) 137ndash163

Hanel P 2003 Protection of intellectual property by manufacturing firms

in Canada In Fred G (Ed) Understanding Innovation in Canadian

Industry McGill-Queenrsquos University Press pp 261ndash292

Hanel P St-Pierre A 2002 Effects of RampD spillovers on the

profitability of firms Review of Industrial Organization 20 305ndash322


Harabi N 1995 Sources of technical progress empirical evidence from

Swiss industry Economics of Innovation and New Technology 4 (1)

67ndash76

Harper RK 1994 Intellectual property and unfair trade market

response to ITC actions International Journal of the Economics of

Business 1 (3) 343ndash353

Hart DM 2001 Antitrust and technological innovation in the US ideas

institutions and impacts 1890ndash2000 Research Policy 923ndash936

Headley W 1998 The Stanford Workshop on Intellectual Property and

Industry Competitive Standards Stanford CA httpstlrstanford

eduSTLRSymposiaAntitrust99_VS_71

Henderson R Jaffe AB Trajtenberg M 1995 The Bayh-Dole Act

and Trends in University Patenting 1965ndash1988 Center for Economic

Policy Research London UK

Hermans JP 1991 Strategies for protection of innovations the case of a

research intensive multinational corporation In Tager U von

Witzleben A (Eds) PATINNOVA rsquo90 Strategies for the Protection

of Innovation Proceedings of the First European Congress on

Industrial Property Rights and Innovation Kluwer Academic Publish-

ers Dordrecht

Himmelberg C Petersen B 1994 RampD and internal finance a panel

study of small firms in high-tech industries Review of Economics and

Statistics 78 38ndash51

Hiraoka K Kuzuwa K Ukai K Mori O 1988 Description The

Improved Multi-Claim System and the Extended Patent Protection

Period Association of Invention Tokyo Japan

Hirschey M Richardson VJ 2004 Are scientific indicators of patent

quality useful to investors Journal of Empirical Finance 11 (1)

91ndash107

Holger E 2001 Patent applications and subsequent changes of

performance evidence from time-series cross-section analyses on the

firm level Research Policy 30 143ndash157

Hoshi T Kashyap AK 1990 Evidence on q and investment for

Japanese firms Journal of the Japanese and International Economies

4 371ndash400

Howell R 1998 Database protection and Canadian laws Prepared for

Industry Canada and Canadian Heritage (also available on the

Internet)

Hunt RM 2001a Patentability Industry Structure and Innovation

Federal Reserve Bank of Philadelphia

Hunt RM 2001b You can patent that Are patents on computer

programs and business methods good for the new economy Federal

Reserve Bank of Philadelphia Business Review 1st Quarter 5ndash15

Industry 1989 Science and Technology Canada amp al appendices for the

survey of intellectual property rights in Canada (2 exemplaires) Final

Report 89 Industry Science and Technology Canada

Industrial Research Institute 1996 Research on the Procedures of

Lawsuits on Intellectual Property Rights Tokyo Japan

Japan Patent Association 1988 Amendment of the patent law on the

multi-claim system guideline to utilize the multi-claim system Patent

Committee the Second Sub-committee No 151 Tokyo Japan

Jarvis S 2000 ICANN sets rules for resolving disputes Marketing News

34 5ndash6

Jaffe AB 2000 The US patent system in transition policy innovation

and the innovation process Research Policy 29 (4ndash5) 531ndash557

Jones JCH Potashnik T Zhang A 2001 Patents brand-generic

competition and the pricing of ethical drugs in Canada some empirical

evidence from British Columbia 1981ndash1994 Applied Economics 33

(7) 947ndash956

Kang PH Snyder KA 2000 A practitionerrsquos approach to strategic

enforcement and analysis of business method patents in the post-state

street era The Journal of Law and Technology IDEA 40 267ndash296

Kanwar S Evenson R 2003 Does intellectual property protection spur

technological change Oxford Economic Papers 55 (2) 235ndash264

Kash DE Kingston W 2000 Patents in the world of complex

technologies Mimeo Mason University

Kefauver W 1993 Intellectual property rights and competitive strategy

an international telecommunication firm In Wallerstein M Mogee

ME Schoen R (Eds) Global Dimensions of Intellectual Property

Rights in Science and Technology National Academy Press

Washington DC pp 236ndash240

Kingston W 1995 Reducing the cost of resolving intellectual property

disputes European Journal of Law and Economics 2 85ndash92

Kingston W 2001 Innovation needs patents reform Research Policy 30

(3) 403ndash423

Kitch EW 1977 The nature and function of the patent system Journal

of Law and Economics 20 265ndash290

Kneller R 1999 Intellectual property rights and university-industry

technology transfer in Japan In Branscomb LM Kodama F

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MA

Knight H 2001 Patent Strategy For Researchers and Research

Managers second ed Wiley New York

Knopf HP 1999 The database dilemma in Canada is lsquoUltrarsquo copyright

required University of New Brunswick Law Journal

Kortum S Lerner J 1997 Stronger Protection or technological

revolution what is behind the recent surge in patenting NBER

Working Papers 6204

Kortum S Lerner J 1999 What Is behind the recent surge in patenting

Research Policy 28 (1) 1ndash22

Kortum S Putnam J 1997 Assigning patens to industries tests of the

Yale technology concordance Economic Systems Research 9

161ndash176

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U von Witzleben A (Eds) PATINNOVA rsquo90 Strategies for the

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on Industrial Property Rights and Innovation Kluwer Academic

Publishers Dordrecht

Kumar N 1996 Intellectual property protection market orientation and

location of overseas RampD activities by multinational enterprises

World Development 24 (4) 673ndash688

Kusonaki K Nonaka I Nagata A 1998 Organizational capabilities

in product development of Japanese firms Organization Science 9

699ndash718

Kwestel M Nusbaum EE 1996 Required disclosures imperil trade

secrets Corporate Cashflow 17

Lall S and Albaladejo M 2002 Indicators of the relative importance of

IPRs in developing countries Elkectronic Journal of Intellectual

Property Rights EJWP 0302 January

Lanjouw JO Lerner J 1998 The enforcement of intellectual property

rights a survey of the empirical literature Annales drsquoEconomie et de

Statistique JanuaryndashJune (49ndash50) 223ndash246

Lanjouw JO Lerner J 2001 Tilting the table The use of pre-

liminary injunctions Journal of Law and Economics Part 1 44 (2)

573ndash603

Lanjouw JO Schankerman M 1997 Stylised facts of patent litigation

value scope and ownership NBERWorking Paper wp 6297 (revised

and published as Characteristics of patent litigation a window on

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2001)

Lanjouw JO Pakes A Putnam J 1998 How to count patents and

value intellectual property the uses of patent renewal and application

data The Journal of Industrial Economics XLVI 405ndash432

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ing News 31

Lazarus G 2001 On the role of patenting in innovation for the

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foreign direct investment Review of Economics and Statistics 78 (2)

181ndash186

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Performance A Study on Behalf of the German Federal Ministry of

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Heidelberg and New York ix 191pp


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Rand Journal of Economics 25 (2) 319ndash333

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Review 92 (2) 221ndash225

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patents 1971ndash2000 Journal of Finance 57 (2) 901ndash930

Levin RC Klevorick AK Nelson RR Winter SG 1987

Appropriating the returns from industrial research and development

Brookings Papers on Economic Activity 783ndash831

Licht G Zoz K 1998 Patents and RampD an econometric investigation

using applications for German European and US patents by German

companies Annales drsquoEconomie et de Statistique JanuaryndashJune

(4950) 329ndash360

Lipner S 1990 The Legal and Economic Aspects of Gray Market

Goods Quorum Books New York

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patenting the business methods in Europe by Olswang and Orford

Intellectual Property Research Centre Electronic Journal of Intellec-

tual Property Rights httpwwwoiprcoxacukEJINDEXhtml

Lubove S 1997 Ron Katz enforcer Forbes 160 78ndash79

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empirical analysis of patent data Research Policy 28 (6) 643ndash660

Mandeville T 1996 Understanding Novelty Information Technological

Change and the Patent System Communication and Information

Science Series Ablex Norwood NJ viii 122pp

Manfroy W 2002 Expanding business of Licensing In Goldscheider R

(Ed) Licensing Best Practises Wiley New York

Mansfield E 1984 RampD and innovation some empirical findings In

Griliches Z (Ed) RampD Patents and Productivity NBER Conference

Report University of Chicago Press Chicago and London

pp 127ndash148

Mansfield E 1985 How rapidly does new industrial technology leak out

The Journal of Industrial Economics 34 217ndash223

Mansfield E 1986 Patents and innovation an empirical study

Management Science 32 173ndash181

Mansfield E 1988 The speed and cost of industrial innovation in Japan

and the US external vs internal technology Management Science 34

1157ndash1168

Mansfield E 1994 Intellectual property protection foreign direct

investment and technology transfer Discussion Paper No 19 The

World Bank International Finance Corporation

Mansfield E Romeo A 1980 Technology transfer to overseas

subsidiaries by US-based firms Quarterly Journal of Economics

737ndash750

Mansfield E Schwartz M Wagner S 1981 Imitation costs and

patents an empirical study The Economic Journal 91 907ndash918

Maskus KE McDaniel C 1999 Impacts of the Japanese patent system

on productivity growth Japan and the World Economy 11 (4)

557ndash574

Matutes C Regibeau P Rockett K 1996 Optimal patent design

and the diffusion of innovations RAND Journal of Economics 27

60ndash83

Mayer T Pfister E 2001 Investissement direct et droits de propriete

intellectuelle dans les pays en voie de developpement une etude

empirique des choix de localisation des multinationales francaise

(Direct investments and intellectual property rights in developing

countries an empirical study of french multinationals location choices

With English summary) Region et Developpement (13) 99ndash123

Mazzoleni R Nelson RR 1998 The benefits and costs of strong patent

protection a contribution to the current debate Research Policy 27

(3) 273ndash284

Merges RP 1997 Patent Law and Policy Cases and Materials Michie

Law Publishers Charlottesville VA

Merges RP 2003 The Uninvited Guest Patents on Wall Street Federal

Reserve Bank of Atlanta Economic Review 4th Quarter 2003 88 (4)

1ndash14

Merges RP Nelson RR 1994 On limiting or encouraging rivalry in

technical progress the effect of patent scope decisions Journal of

Economic Behavior and Organization 25

Merges R Nelson RR 1990 On the complex economics of patent

scope Columbia Law Review 90 (4) 839ndash917

Moore KA 2000 Judges juries and patent casesmdashan empirical peek

inside the black box Michigan Law Review 99 (2) 365ndash409

Mowery DC 1996 The International Computer Software Industry A

comparative Study of Industry Evolution and Structure Oxford

University Press New York

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Nelson RR (Eds) The Success of Industrial Leadership Cambridge

University Press Cambridge

Mowery DC Nelson RR 1999 Explaining industrial leadership In

Mowery D-C Nelson R-R (Eds) Sources of Industrial Leader-

ship Studies of Seven Industries Cambridge University Press

Cambridge New York and Melbourne pp 359ndash382

Mowery D Ziedonis AA 2001 Numbers quality and entry how has

the Bayh-Dole Act affected US university patenting and licensing In

Jaffe AB Lerner J Stern S (Eds) Innovation Policy and the

Economy vol 1 MIT Press for the National Bureau of Economic

Research Cambridge and London xiii 252pp

Mowery DC Oxley JE Silverman BS 1998 Technological overlap

and interfirm cooperation implications for the resource-based view of

the firm Research Policy 27 (5) 507ndash523

Mowery DC et al 2001 The growth of patenting and licensing by US

universities an assessment of the effects of the Bayh-Dole Act of 1980


Nelson RR 2004 The market economy and the scientific commons

Research Policy 33 455ndash471

Nermien Al-Ali 2003 Comprehensive Intellectual Capital Management

Wiley New York

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Property Prepared for Intellectual Protection Australia

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creating entity a new perspective on the theory of the firm Industrial

and Corporate Change 9 (1) 1ndash20

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Treatment of Technological Change MIT Press Cambridge MA

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Economic Review 62 428ndash431

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Public Research Organisations Organisation for Economic Co

operation and Development Paris

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Goto A Odagiri H (Eds) Innovation in Japan Oxford University

Press Clarendon Press Oxford and New York viii 311pp

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Maintenance Costs) Presented at the 27th Pacific Intellectual Property

Association General Meeting in Hiroshima

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Group (Belgium) In Tager U von Witzleben A (Eds) PATIN-

NOVA rsquo90 Strategies for the Protection of Innovation Proceedings of

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Innovation Kluwer Academic Norwell MA and Dordrecht

Deutscher Wirtschaftsdienst Cologne xi 337pp

Ordover JA 1999 Competition innovation and the Microsoft mono-

poly In Eisenach J-A Lenard T-M (Eds) Antitrust in the Digital

Marketplace Proceedings of a Conference held by the Progress and

Freedom Foundation in Washington DC February 5 1998 Kluwer

Academic Boston Dordrecht and London x 297pp

Ordover JA 1991 A patent system for both diffusion and exclusion

Journal of Economic Perspectives 5 43ndash61

Ostergard Jr RL 2000 The measurement of intellectual property rights

protection Journal of International Business Studies 2nd Quarter 31

(2) 349ndash360

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governance the impact of intellectual property protection on the


structure of inter-firm alliances Journal of Economic Behavior and

Organization 38 (3) 283ndash309

Pakes A 1985 On patents RampD and the stock market rate of return

Journal of Political Economy 93 (2) 390ndash409

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patents research gestation lags and the private rate of return

to research resources In Griliches (Ed) RampD Patents and

Productivity The University of Chicago Press Chicago 1984

pp 73ndash88

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Productivity Growth Evidence from Cross-National and Manufac-

turing Industry Data International Industry Canada Conference on

Intellectual Property and Innovation in the Knowledge-Based

Economy Toronto May

Parr RL 1999 Intellectual Property Infringement Damage Wiley

New York

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property Berkeley Technology Law Journal 17 (3) 1043ndash1083

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in Canada Canadian Public Policy

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pharmaceutical innovation In Industry Canada International Con-

ference on Intellectual Property and Innovation in the Knowledge-


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wwwoiprcoxacukEJINDEXhtml

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companies patent licensing decisions and learning opportunities

Research Policy 425ndash442

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Harvard Business Review May 6

Prakash GG 2001 Trends in patent cases The Journal of Law and

Technology IDEA 41 283ndash295

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and the effect on Canadian exports In Industry Canada International



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property rights systems to economic performance a study of the

Canadian experience In Industry Canada International Conference


Economy Toronto May

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technology boat Evidence based on the quality and quantity of

innovations Mimeo Industry Canada

Rafiquzzaman M Whewell L 1999 Trends in cross-country innovative

performance and the determinants of international patenting activities

Mimeo Industrie Canada Ottawa

Raincock BJD 1991 Possibilities and limitations of insurance cover for

patent disputes In Tager U von Witzleben A (Eds) PATINNO-

VA rsquo90 Strategies for the Protection of Innovation Proceedings of the


tion Kluwer Academic Norwell MA and Dordrecht Deutscher

Wirtschaftsdienst Cologne xi 337pp

Ramsay JT 2002 Dreadful drafting the dorsquos and donrsquots of licensing

agreements In Goldscheider R (Ed) Licensing Best Practices

Wiley New York

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Licensing Best Practices Wiley New York

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New York

Reitzig M 2004a Improving patent valuations for management

purposesmdashvalidating new indicators by analyzing application ratio-

nales Research Policy 33 (6ndash7) 939ndash957

Reitzig M 2004b The private values of lsquothicketsrsquo and lsquofencesrsquo towards

an updated picture of the use of patents across industries Economics

of Innovation and New Technology 13 (5) 457ndash476 (special issue)

Reitzig M 2003 What determines patent value Insights from the

semiconductor industry Research Policy 32 (1) 13ndash26

Rivette KG Klein D 2000 Rembrandts in the Attic Unlocking the

Hidden Value of Patents Harvard Business School

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production and use of innovations in the UK 1945ndash1983 Research

Policy 17 1ndash14

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better imitators In Edward W Rosenberg N (Eds) Exploring the

Black Box TECHNOLOGY Economics and History Cambridge

University Press Cambridge New York and Melbourne pp 121ndash138

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logical Innovation for the 21st Century Pinter London

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than you think wwwbereskinparrcom

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Research on Technological Innovation Management and Policy vol

7 Elsevier Science Amsterdam New York Tokyo pp xvi 261

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innovation Evidence from the 1998 Japanese patent law reforms

NBER Working Paper wp7066

Sandri S 1991 Transnational licensing company strategies In Tager





Sani P 1991 Licensing in and licensing out from the viewpoint of a large

company In Tager U von Witzleben A (Eds) PATINNOVA rsquo90




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technology field RAND Journal of Economics 29 77ndash107

Scherer FM 1972 Nordhausrsquo theory of optimal patent life a geometric

reinterpretation American Economic Review 62 422ndash427

Scherer FM 2005 Edwin Mansfield an appreciation The Journal of

Technology Transfer 30 (12) 3ndash9

Scherer FM Harhoff D 2000 Technology policy for a world of skew-

distributed outcomes Research Policy 29 559ndash566

Scherer FM 1959 Patents and the Corporation Boston privately

published

Scotchmer S 1991 Standing on the Shoulders of Giants Cumulative

Research and the Patent Law Journal of Economic Perspectives 5 (1)

29ndash41

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tion products be patentable Rand Journal of Economics 27 (2)

322ndash331

Scotchmer S Green J 1990 Novelty and disclosure in patent law

RAND Journal of Economics 21 131ndash147

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protection in the US and Europe In Industry Canada International



Sears MH 2002 Submarine patents under attack Managing Intellectual

Property Issue 125 p 45 December 2002ndashJanuary 2003

Seguin-Dulude L Desranleau C 1988 The Individual Canadian

Inventor Statistics Canada Technology and Capital Stock Division

Catalogue pp 88ndash510

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foreign direct investment Columbia Journal of World-Business 31

(1) 50ndash59

Shane H Klock M 1997 The relation between patent citations and

Tobinrsquos Q in the semiconductor industry Review of Quantitative

Finance and Accounting 9 131ndash146


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pools and standard setting In Jaffe AB Lerner J Stern S (Eds)

Innovation Policy and the Economy vol 1 MIT Press for the

National Bureau of Economic Research Cambridge and London xiii

252pp

Sherry E Teece DJ 2004 Royalties Evolving Patent Rights and the

Value of Innovation Research Policy 33 (2) 179ndash191

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Wiley New York

Simensky M et al 1999 Intellectual Property in the Global Market

Place Wiley New York

Smith GV 1997 Trademark Valuation Wiley New York

Smith GV Parr RL 1998 Valuation of Intellectual Property and

Intangible Assets third ed Wiley New York

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sales and licenses Journal of International Economics 55 (2) 411ndash439

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Computer Law 23 (10)

Stolpe M 2000 Protection against software piracy a study of technology

adoption for the enforcement of intellectual property rights Econom-

ics of Innovation and New Technology 9 (1) 25ndash52

Tager U von Witzleben A 1991 PATINNOVA rsquo90 Strategies for the



Norwell MA and Dordrecht Deutscher Wirtschaftsdienst Cologne

xi 337pp

Taylor CT Silberston ZA 1973 The Economic Impact of the Patent

System Cambridge at the University Press London

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harmonisation in Europe Contributions to Economics Physica

Heidelberg and New York x 186pp

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Semiconductors The Brookings Institute Washington DC

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comment Journal of Political Economy 81 1245ndash1252

Trajtenberg M 2000 Is Canada missing the technological boat

Evidence from the patent data Discussion Paper No 9 Industry

Canada Ottawa

Trajtenberg M 1990 A penny for your quotes patent citations and the

value of innovations Rand Journal of Economics 21 (1) 172ndash187

UNIDO 1996 Manual on Technology Transfer Negotiation United

Nations Industrial Development Organization (UNIDO) Vienna

University of Dublin Enforcing small firms patent rights Eur-Op

European Comission ISBN92-894-0633-X

University of Texas 2003 Crash Course on the Internet and Copyright

httpwwwutsystemeduOGCIntellectualPropertycprtindxhtm

US Copyright Office 2003 httplcweblocgovcopyright

USPTO 2000 Technology profile report semiconductor devices and

manufacture 11969ndash121999 (A Technology Assessment and Forecast

Report) US Patent and Trade Mark Office Washington DC

Weston H 1998 Rapporteurrsquos report In Proceedings of the Stanford

Workshop on Intellectual Property and Industry Competitive Stan-

dards Stanford Law and Technology Policy Center Stanford April

17ndash18

WIPO 2003 Intellectual property issues related to electronic commerce

httpwwwwipointsme

Zack C 2001 How to Restructure Technology-Rich Companies

Managing Intellectual Property London

Zitt M et al 1999 Territorial concentration and evolution of science

and technology activities in the European union a descriptive analysis


Zuniga P Combe E 2001 The effects of strengthening intellectual

property rights in the pharmaceutical sector the Mexican case Paper

presented at 78th International Conference of the Applied Econo-

metrics Association Innovations and Intellectual PropertymdashEconom-

ic and managerial perspectives Bruxelles Novembre 23

Petr Hanel is Professor of Economics at the Universite de

Sherbrooke and a member of the Centre interuniversitaire de

recherche sur la science et la technologie in Montreal Canada

His previous work includes two books and numerous articles and

studies on economic aspects of technological change innovation

industrial and commercial policies and international trade Most

recently he is the co-author with John Baldwin of the book

Innovation and Knowledge Creation in an Open Economy-

Canadian Industry and International Implications published by

the Cambridge University Press in July 2003

Intellectual property rights business management practices A survey of the literature

Introduction

Changes that contributed to the creation of a patent friendly era in the US

Introduction in the US of the court of appeals for the federal circuit

US policies regarding patenting of inventions arising from publicly funded research in federal RampD laboratories and universities

Expansion of the realm of patentability

Expansion of the patent scope

Changes in the international trade and investment environment

Evolution of the interpretation of IP laws

The trend of patenting in the US--was there a change what might have caused it and was it beneficial for further technical progress

Overview of the IPRs use and strategies in the United States Canada Japan EU and elsewhere

The use of IPRs in the US

Use of patents to create a monopoly

Use of IP in horizontal oligopolies

Use of IP in vertical relations with suppliers and customers

Overview of the recent research regarding the use of IPRs in Canada

Appraisal of the recent evolution of patenting in Canada

Patenting and IPRs use in European countries21

The use of IPRs in Japan--comparison with the United States and other countries

Protection of IPRs in Australia

Protection of IP in specific industry groups

Chemicals pharmaceuticals food textiles metals and metal products

The pharmaceutical industry

Information technologies and communications

Semiconductors computer and communication equipment

Protection of IP in the software industry and business methods

IP and the Internet

The use of IPRs by size and ownership of firms

Small and medium-sized firms

Use of IPRs by multinational firms

IP strategies organization human resources and training of IP personnel

IP strategies

Human resources and their training

The impact of IP on the value of the firm

Economic value of patents

Accounting rules and value of IP

Management of intellectual property

Assessing measuring and auditing IP portfolios

Valuation of IP

Managing of IP assets

Accounting and IP

IP as financial asset

Enforcement of IPRs infringement and dispute resolution

Litigation

Examples of Internet and computer infringement of IP

Insurance

Summary

Acknowledgments

References

ARTICLE IN PRESS

1Since patenting by universities is outside of the scope of the present

project the large and rapidly increasing literature covering patenting by

universities is not covered here


The survey starts with an overview of changes in the USand international IPR regimes leading to the so-calledlsquolsquopatent friendly erarsquorsquo Surprisingly as Section 3 shows thenotable increase in the use of patents in the US cannot beattributed mainly to favorable changes in the US IPregime The rise of patenting and use of other IPinstruments has often little to do with their effectivenessin protecting IP and much more with their usefulness incorporate strategies blocking competition and providingbargaining chips for cross-licensing Section 4 overviewsthe IPRsrsquo use and strategies in the US Canada EU Japanand Australia It is well known that the importance ofvarious IP instruments varies significantly from oneindustrial sector to another After a brief look at IP inmore traditional industries Section 5 focuses on IPpractices and strategies used in information technologiesand communications including computers software busi-ness methods and Internet applications Patenting in lifesciences applications that would require a separate sectionwas mentioned only to illustrate certain specific points

The empirical literature surveyed in Section 6 shows thatsmall firms are less likely to use IP than larger ones andmultinational corporations (MNC) more likely than firmsowned by nationals The reluctance of smaller firms to useIP is to a certain degree explained by the financial burdenpatenting and patent litigation represents for smallcompanies

With the increasing importance and use of IP itsmanagement is becoming an integral part of a companyrsquoscompetitive strategies The cost of IP its management andthe human resources involved are presented in Section 7 Inorder to better derive value from IP firms use more andmore sophisticated methods The valuation of IP portfo-lios its accounting and integration into corporate financialstrategies are discussed in the following section

Finally references to enforcement infringement andnegotiation of licensing agreements conclude the survey

2 Changes that contributed to the creation of a patent

friendly era in the US

21 Introduction in the US of the court of appeals for the

federal circuit

The introduction in the US of the Court of Appeals forthe Federal Circuit (CAFC) in 1982 marked the beginningof important changes in the US legal environmentregarding the protection of IP It began an era of strongIP rights To document the importance of the change(Jaffe 2000) reports that before 1980 a district courtfinding that a patent was valid and had been infringed wasupheld on appeal 62 of the time between 1980 and 1990this percentage rose to 90 Conversely before 1980appeals overturned only 12 of district court invalidity ornon-infringement decisions That percentage rose to 28in the later period As a result the overall probability that alitigated patent will be held to be valid has risen to 54

Patentees asserting infringement are also now more likelyto be granted a preliminary injunction barring the sales ofthe alleged infringing product during the litigation(Lanjouw and Lerner 1998)

22 US policies regarding patenting of inventions arising

from publicly funded research in federal RampD laboratories

and universities

The rules regarding who can patent have changed Withthe introduction of the Bayh-Dole Act (1980) the policyhas evolved from one in which patenting of inventionsderived from public funding was the exception to one inwhich such patenting is widespread Mowery et al (2001)and Mowery and Ziedonis (2001b) examined the effects ofBayh-Dole at three leading universities the University ofCalifornia Stanford University and Columbia UniversityTwo of these universities (California and Stanford) wereactive in patenting and licensing before Bayh-Dole and one(Columbia) became active only after its passage Theevidence suggests however that Bayh-Dole was only one ofseveral important factors behind the rise of universitypatenting and licensing activity A comparison of thesethree universities reveals remarkable similarities in theirpatent and licensing portfolios 10 years after the passage ofthe Bayh-Dole Act In a subsequent article by Mowery andZiedonis (2001b) the authors extended their analysis to allUS universities According to their analysis of overall USuniversity patenting the patents granted to institutionsthat entered into patenting and licensing after the Bayh-Dole Act are less important and less general than thepatents issued before and after 1980 to US universities withlonger experience in patenting1 Trends and practices inuniversity licensing and intellectual capital managementare discussed by Berneman and Denis in Goldscheider(2002 Chapter 11)Patenting and licensing at public research institutions

received less attention than patenting by universitiesOECDrsquos (2003) report offers a good international overviewof the legal and regulatory framework regarding this issue

23 Expansion of the realm of patentability

The patentable subject matter ie what can be patentedhas expanded The US patent office accepted patentabilityof genetically engineered bacteria and animals geneticsequences (Eisenberg 2000) surgical methods computersoftware financial products methods for auctioning on theWorldwide Web etc According to Kortum and Lerner(1997 1999) the share of biotechnology patents grew fromabout 3 of total patents in 1961 to about 6 andcomputer software from 4 to almost 7 of total patentsin 1991 The increases were even stronger in the 1990s







environment























ARTICLE IN PRESS

2

att

lab

gen

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in

det

(Ro








favor of imitators






technical progress


































inventions































technologists and


















customers



(i)

8T

by th

been

Instr

as a

engi

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of s

resea

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in p

choi

Adv

cons

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ortium

9T

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One

univ

phar

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perc

the

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affec

the r

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on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References







environment























ARTICLE IN PRESS

2

att

lab

gen

tha3

in

det

(Ro








favor of imitators






technical progress


































inventions































technologists and


















customers



(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

















ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References

ARTICLE IN PRESS

2

att

lab

gen

tha3

in

det

(Ro








favor of imitators






technical progress


































inventions































technologists and


















customers



(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

















ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References

















inventions































technologists and


















customers



(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

















ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References






















technologists and


















customers



(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

















ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References






customers



(i)

8T

by th

been

Instr

as a

engi

build

of s

resea

com

role

in p

choi

Adv

cons

cons

















ortium

9T

issue

One

univ

phar

thes

perc

the

phar

affec

the r

prod

arra

prod10

on c


(ii)




IPRs in Canada















uct development


omputer chips)



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References



(1)

11

grou

and12

and13

Am

copy

artis

copy

copy

6 m

chan

IPR

tech


(2)


(3)


(4)


(5)







(Hanel 2003)

























Patents Trade

marks

Copy-

right

Trade

Secrets

Inte-

grated

circuit

design

Industry

design

Plant

breederrsquos

right

Others

Innovators 2466 3131 944 1799 199 1348 0451 102

All 1632 2296 635 117 114 905 051 082








Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References




Canada











(i)


(ii)


(iii)














Status Share of

popula-

tion

Patents Trade-

marks

Copy-

right

Trade

secrets

Confiden-

tiality

Others Any

IPR

Innovation 807 293 398 136 284 484 27 726

Unsuccessful 72 141 253 64 144 326 18 497

Not involved 121 83 191 45 75 169 23 359

All 1000 257 360 120 247 432 25 661




































cially for the SME





technologies























(1)

26

pate

1999

of A







(2)


(3)


(4)



ARTICLE IN PRESS

















Policy



3




and also











metal products

































chemical industries

Industry of

innovating

firms

using

any IPR

Of these using

















equipment










1








2










methods





























the same






















awarded in practice




Albaladejo (2002)

















of IP personnel

71 IP strategies














5

of

tec

pur




and also













poses





































(1)

54

man

(Ne

som


(2)



(3)









92 Valuation of IP



1


2


3

Rating-Ranking

4


5



6

Auctions












(1)


(2)


(3)


(4)











ARTICLE IN PRESS














resolution

101 Litigation




ARTICLE IN PRESS





monopoly























103 Insurance




11 Summary

























Acknowledgments



References











Calgary xiv 477pp

















451ndash475





27 (2) 127ndash141































Swansea












59ndash82







xi 337pp








New York






January 2003












ber 23























(4) 15ndash33









DEXhtml






New York







(49)


digitalprofessororg










Williston VT)







Strategy






Office Munich



(2) 300ndash331


Ottawa














165ndash179




























Economy Toronto May



275ndash302


























(8) 1253ndash1266









London















67ndash76

















ers Dordrecht









91ndash107






4 371ndash400



Internet)















34 5ndash6






(7) 947ndash956
















(3) 403ndash423






MA







Working Papers 6204





161ndash176











699ndash718











573ndash603





2001)





ing News 31







181ndash186




















(4950) 329ndash360


















pp 127ndash148







1157ndash1168






737ndash750





557ndash574



60ndash83









(3) 273ndash284





1ndash14
































Wiley New York


































(2) 349ndash360












pp 73ndash88





Economy Toronto May


New York




























Economy Toronto May















Wiley New York






New York













Policy 17 1ndash14



































published



29ndash41



322ndash331














(1) 50ndash59









252pp




Wiley New York

















xi 337pp












Canada Ottawa
















17ndash18


httpwwwwipointsme






















Introduction

























IP and the Internet





IP strategies







Valuation of IP


Accounting and IP



Litigation


Insurance

Summary

Acknowledgments

References

Intellectual property rights business management practices: A … P 2006... · 2018. 3. 11. ·...

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Transcript of Intellectual property rights business management practices: A … P 2006... · 2018. 3. 11. ·...