Biotechnology - Genomic and Proteomics/Overview of Economics of Intellectual Property in BGP

Where does the literature says IP works and does not work?

When IP does work

• When R&D costs are high
  • “On average, a lack of patent protection would have prevented the development of 60% of pharmaceutical and 38% of chemical inventions. In most sectors, a lack of patent protection would have had little impact, resulting in 17% fewer inventions in machinery, 12% less in fabricated metals, 11% less in electrical equipment, and no effect at all in office equipment, motor vehicles, rubber, and textiles.” (Arundel pp. 11)
  • “Only four chemical industries (drugs, plastic materials, inorganic chemicals, and organic chemicals) and petroleum refining rated process patent effectiveness higher than four on a seven-point scale, and only these four chemical industries and steel mills rated product patents higher than five.” (Levin pp. 796)
• When research methods can be patented (as in Biotech)
  • research tools develop faster in biotech than in other industries - so there's a profit to be had just coming up with new research processes (Harison pp. 26)
  • Current US IP law does not make a distinction between discovery and invention, could have possible impact on innovation (pp. 28)
• When patents can be used strategically
  • “The patenting strategies of American firms appear to be strongly driven by the wish to block competitors and to prevent copying. The use of patents as a means of sharing information, for example through licensing or in negotiations, is less important for American firms than for European and Japanese firms.” (Arundel pp. 13)

When IP doesn't work

• When lead time is a primary competitive advantage
  • von Hippel and Levin both found that companies preferred to protect innovations through secrecy and lead times (pp. 3)
• When the goal is spreading information
  • only a small number (3%) of high technology firms use patent and copyright publications sources of new information. Compare to trade conferences: 70% (Arundel pp. 3,5)
• When there are other means of protecting competitive advantages (Levin pp. 794):
  • on a scale of 1-7 (7 being the most important), business executives were asked to rate the importance of various techniques for protecting competitive advantages. The number is the average score, and the bracketed number is the margin of error. Compare between Products and Processes:

	Processes	Products
Patents to prevent duplication	3.52 (0.06)	4.33 (0.07)
Patents to secure royalty income	3.31 (0.06)	3.75 (0.07)
Secrecy	4.31 (0.07)	3.57 (0.06)
Lead time	5.11 (0.05)	5.41 (0.05)
Move down the learning curve	5.02 (0.05)	5.09 (0.05)
Sales or service efforts	4.55 (0.07)	5.59 (0.05)

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• • As you can see from the table above, IP was viewed as marginally effective for protecting processes, and least effective compared to other methods for protecting products

What are the other incentives mentioned by the literature?

• People are wary of using patents (Levin pp. 784):
  • not perfect appropriable
  • often not worth the cost of the application process
  • patents considered easily circumvent-able
• As seen in above table, there seem to be other means of capitalizing on competitive advantage

is there data on "how much of an increase of the tendency towards enclosure".

sub-question: e.g. how much does the biotechnology field have patented? Has this movement increased over time?