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\begin{comment}
Please include the following acknowledgements in any reproductions of this material.
Source document: Kevin A. Bryan and Heidi L. Williams, 2021. 
Figure #: © .  All rights reserved. [Citation with link to source]
Table #: © .  All rights reserved. [Citation with link to source]
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\title[]{Innovation: Market Failures and Public Policies} 
\subtitle{Lecture 4: Intellectual property rights \vspace{3cm}}
\institute[]{\justifying The material covered in these slides is drawn from: Bryan, Kevin and Heidi Williams (2021) "Innovation: Market Failures and Public Policies," Chapter 13 in the \emph{Handbook of Industrial Organization Volume 4}, edited by Kate Ho, Ali Hortacsu, and Alessandro Lizzeri.}
\date{} 

\graphicspath{{graphics/}}

\begin{document}
	
\frame{\titlepage}

\begin{frame}{Intellectual property rights (IPR)}
    Formal intellectual property (IP): \textit{a set of government policies which grants special rights to exclude others from producing, selling, licensing, or building on products, resulting in less competition than would be faced in a free market}
    
 \vspace{6mm}
 
Unlike taxes and subsidies, IP affects both the cost of research and the reward to research:
\begin{itemize}
    \item Cost: sometimes requires inventors to license ideas they wish to build on
    \item Reward: limits ex-post competition
\end{itemize}
 \vspace{6mm}
 
This lecture focuses on one form of IP: patents        
\end{frame}

\section{A primer on patents}

\begin{frame}
    \frametitle{Outline}
    \tableofcontents[currentsection]
\end{frame}

\begin{frame}{The patent application process}
    
This lecture foucses on the U.S. Patent and Trademark Office (USPTO), but discusses various dimensions of international patenting
\vspace{3mm}

\begin{itemize}
    \item When filing a new patent application, inventors must submit a written description of their invention
    \begin{itemize}
        \item Includes a discussion of ``prior art'': publicly available information relevant to the originality of the patented invention
        \item Includes a specific list of claims that the applicant seeks to assert intellectual property rights over
    \end{itemize}
    \item Applicants pay filing fees varying by type of application and applicants' entity size
    \begin{itemize}
        \item Cost of filing a patent: \$10,000 to \$40,000
        \begin{itemize}
            \item Serves as a barrier to startups and other small firms {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Graham 2009]}}
        \end{itemize}
    \end{itemize}
\end{itemize}
    
\end{frame}

\begin{frame}{Patent review process}

\begin{enumerate}
    \item After submission, patent application is assigned to a group of patent examiners with relevant technological expertise, and assigned to a specific examiner for review
    \begin{itemize}
        \item Examiners determine whether the application meets the standard for patentability
        \begin{itemize}
            \item Claimed inventions: must be patent-eligible, novel, non-obvious, and useful
            \item Text of patent: must meet requirements for disclosure and claim definiteness
        \end{itemize}
    \end{itemize}
    \vspace{3mm}
    \item Examiners can either issue a first action allowance (i.e. grant the patent) or issue a de facto rejection, allowing applicants the opportunity to revise their submission
    \begin{itemize}
        \item The patent application review process often involves multiple rounds of rejection and revision
        \item Patent applications cannot be rejected by the USPTO, only abandoned by applicants {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Lemley and Sampat 2008]}}
    \end{itemize}
\end{enumerate}
    
\end{frame}

\begin{frame}{How many patents does the USPTO grant?}
    
Patent reform debates often focus on whether the USPTO grants ``too many'' or ``too few'' patents
\vspace{3mm}

This debate has a long history:
\begin{itemize}
    \item Machlup and Penrose (1950) discuss the 19th century patent abolition movement
    \item Polanvyi (1944) presents conceptual arguments against patents in the context of industrial research
    \item More recently, debates have considered whether the USPTO’s bar for novelty might be too low – resulting in too many new grants
\end{itemize}
\vspace{3mm}
Before attempting to answer whether the grant rate is too high/low, we first consider the challenge of measuring the USPTO’s grant rate    
\end{frame}

\begin{frame}{Challenges finding the patent grant rate}

\begin{itemize}
    \item Data on patent applications and grants are made publicly available
    \begin{itemize}
        \item Historically, records of successful applications and their associated grants were available
        \item Until recently, unsuccessful applications were not reported, complicating measurement efforts
    \end{itemize}
    \item Even when unsuccessful applications can be observed, it is not clear how long after an initial submission a final allowance or rejection will occur
    \begin{itemize}
        \item Rounds of rejection and revision can unfold quickly or slowly depending on the USPTO’s review lags and applicants’ timeliness in resubmitting
    \end{itemize}
    \item Closely related patent applications – including continuations and divisionals – may be produced at some point during the prosecution process and can contain ideas from the original grant
    \begin{itemize}
        \item How should these be incorporated?
    \end{itemize}
\end{itemize}
\vspace{3mm}
The following figure tabulates counts of USPTO applications and grants by year from 1963-2019
    
\end{frame}

\begin{frame}{USPTO patent applications and grants by year, 1963-2019}

\begin{center}
    \includegraphics[scale=0.62]{figure6_applications_grants.pdf}
    \end{center}
\scriptsize \textcolor{red!75!green!50!blue!25!gray}{Notes: These totals include utility, design, and plant patents as well as patent reissues. Source: USPTO Patent Technology Monitoring Team (2021)}

\end{frame}

\begin{frame}{Measuring grant rates}

\begin{itemize}
    \item Carley, Hedge, and Marco (2015) uses non-publicly available USPTO administrative data including \textit{all} applications
    \item Analysis identifies ``progenitor'' patents (patent applications not derived from previous applications)
    \item Authors also look at a ``family allowance rate,'' incorporating patent grants that accrue to continuations or divisionals derived from the original application
\end{itemize}
\vspace{3mm}

Findings suggest that initial (first action) allowances are relatively infrequent, but that progenitor allowance rates are much higher
\begin{itemize}
    \item Suggests that many applications are granted patents only after at least one revision
\end{itemize}
\end{frame}

\begin{frame}{USPTO allowance rates for applications filed from 1996-2005 and examined before mid-2013}

\begin{center}
    \includegraphics[scale=0.55]{figure7_grant_rates.pdf}
    \end{center}
\scriptsize \textcolor{red!75!green!50!blue!25!gray}{Note: The dashed lines represent the highest possible allowance rates (i.e., the allowance rate assuming that every pending application as of June 30, 2013 is allowed)Source: These totals include utility, design, and plant patents as well as patent reissues. Source: Carley, Hedge, and Marco (2015)}

\end{frame}

\begin{frame}{Value of patents}
    
The value distribution of granted patents is quite skewed, so patent counts can be misleading {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Pakes 1986]}}
\vspace{3mm}
\begin{itemize}
    \item How to measure the value of granted patents?
    \begin{itemize}
        \item Forward patent citations {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Trajtenberg 1990]}}
        \item Patent renewals {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Bessen 2008, Pakes 1986, Schankerman and Pakes 1986]}}
        \item Licensing revenue {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Abrams et al. 2019]}}
        \item Excess stock market returns {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Kogan et al. 2017]}}
    \end{itemize}
    \item These metrics capture different quantities: excess stock market returns measures the ``surprise'' component of private returns to a patent at the time of grant, and forward citations aim to capture spillovers
    \begin{itemize}
        \item Nevertheless, these measures have a strong, positive correlation
    \end{itemize}
\end{itemize}
    
\end{frame}

\begin{frame}{Forward citations and market value (1926-2010)}

\begin{center}
    \includegraphics[scale=0.55]{figure8_citations_value.pdf}
    \end{center}
\scriptsize \textcolor{red!75!green!50!blue!25!gray}{Note: This figure plots the cross-sectional relationship between forward patent citations and the estimated excess stock return patent value estimate constructed by Kogan, Papanikolaou, Seru, and Stoffman (2017), which is defined only for granted US patents assigned and linked to publicly traded firms. Sources: Kogan, Papanikolaou, Seru, and Stoffman (2017) and USPTO administrative records}

\end{frame}

\begin{frame}{Other patent basics}

\begin{itemize}
    \item USPTO-granted patent rights don't extend to foreign markets, so inventors wanting IP rights abroad must file a separate application in that region
    \item Granted patents require maintenance fees to remain active
    \item If patents are active, owners can enforce patent rights with litigation
    \begin{itemize}
        \item Only 1-2\% of patents are litigated, though others are challenged and settle out of court
        \item Valuable patents are more often targets of legal action 
    \end{itemize}
    \item Patents can change ownership and owners may record these changes with the USPTO
    \begin{itemize}
        \item See Serrano (2010) for an examination of recorded ownership changes
    \end{itemize}
\end{itemize}
    
\end{frame}

\begin{frame}{Share of active patents traded (conditional on any previous trading)}

Previously traded patents are more likely to be traded again, and probability of ownership changes declines with patent age {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Serrano 2010]}}

\begin{center}
    \includegraphics[scale=0.45]{figure9_transfers.pdf}
    \end{center}
\scriptsize \textcolor{red!75!green!50!blue!25!gray}{Note: This figure is similar to Serrano (2010). Source: Marco, Myers, Graham, D'Agostino, and Apple (2015)}

\end{frame}

\begin{frame}{Proliferation of patent data}

\begin{itemize}
    \item Digital full-text versions of patent grants since 1976 are publicly available
    \item Each step of the application process is now publicly documented in the Patent Application Information Retrieval (PAIR) data
    \begin{itemize}
        \item Enables modern text analysis methods to compute text-based measures of patent quality
        \item Allows extraction of data on citations, inventor locations, assignees, claims, and more
    \end{itemize}
\end{itemize}
    
\end{frame}

\section{Intellectual property: theory}

\begin{frame}
    \frametitle{Outline}
    \tableofcontents[currentsection]
\end{frame}

\begin{frame}{Patent rights}
Patents take a nonrival resource – knowledge – and create artificial scarcity
\begin{itemize}
    \item Idea of patents dates back to 15th century Venice {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Comino et al. 2020]}}
    \item At odds with traditional notions of property rights, in which property rights \emph{address} the problem of scarcity
\end{itemize}

\vspace{6mm}

Theoretical rationale for patents is essential in understanding their use as a policy lever    
\end{frame}

\begin{frame}{Theoretical benefits of patents}

Four main benefits of patents:
\begin{enumerate}
    \item Allow inventors to appropriate more of the social value of their invention
    \item Reward inventors for their contribution to future inventions enabled by their idea
    \item Allow licensing markets
    \item Force secrets related to the invention to be disclosed
\end{enumerate}
    
\end{frame}

\begin{frame}{Theoretical costs of patents}

Four main costs of patents:
\begin{enumerate}
    \item Patent holders can charge above marginal cost
    \item Limit diffusion if there are transaction costs
    \item Cause excess spending on races to acquire patents or attempts to ``invent around'' the patent ex-post
    \item Sometimes distort the direction of innovation
\end{enumerate}
    
\end{frame}

\begin{frame}{Early arguments for patents}

\begin{itemize}
    \item John Bates Clark: ``If an invention became public property the moment that it was made, there would be small profit accruing to any one from the use of it and smaller ones from making it'' {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Clark 1915]}}
\vspace{3mm}
    \item Jeremy Bentham: Patents ensure the net social value of an invention exceeds the net private value if the cost of the invention cannot be recouped before competition arrives {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Bentham 1825]}}
    \begin{itemize}
        \item Patents allow inventors to ``sow what they reap''
        \item Downside: inventions conceived as a byproduct of normal production or as a result of luck or curiosity do not require patent protection
    \end{itemize}
\end{itemize}

\end{frame}

\begin{frame}{Ex-ante competition: patent races}
    
Ex-ante competition plays an important role in shaping research incentives

\vspace{3mm}

\begin{itemize}
    \item Patent race model of Loury (1979): patent arrival rate is a function of each firm's research effort, set prior to the game as a fixed cost
    \begin{itemize}
        \item Firms overinvest in R\&D because they do not account for the fact that their effort lowers the probability rival firms will invest
    \end{itemize}
    \item Lee and Wilde (1980) alters the Loury model, allowing firms to only pay for R\&D while they are researching
    \begin{itemize}
        \item Firms still put too much effort into R\&D
    \end{itemize}
    \item Reinganum (1982) and Judd (2003) extend patent races to differential games where firms can choose research intensity over time and value of inventions vary
    
\end{itemize}
    
\end{frame}

\begin{frame}{Sequential innovation problem}

Patents also protect inventions which build on initial inventions

\vspace{5mm}

Green and Scotchmer (1995): with sequential invention, not enough total social value to provide effective incentives on the margin for each investor
\begin{itemize}
    \item Firm A can invent a product (cost $c_1$) with no social value, but it makes a second invention possible
    \item Firm B can develop follow-on invention (cost $c_2$) with social value $v$
    \item Optimal to invent both products if $v > c_1 + c_2$, but marginal value of \textit{each} invention is $v$
    \item Say $c_1$ is close to zero, $c_2$ nearly equals $v$
    \item Firm A won't invest if its patent doesn't cover follow-on invention, and otherwise Firm B may not invest due to licensing negotiations
\end{itemize}
    
\end{frame}

\begin{frame}{More on sequential innovation}
    
From Green and Scotchmer (1995): optimal sequential invention depends on a) patents covering follow-on inventions for early inventors, and b) identification of future inventors before they sink R\&D costs

\begin{itemize}
    \item Denicolo (2000) counters that strong patent rights for initial inventors create even more patent races
    \item Gallini (1992): if it is possible to invent substitutes for a patented invention at cost, then long-lived patents can cause more competition in the short-run by inspiring the invention of these competing products
\end{itemize}
    
\vspace{3mm}

In sum, patents theoretically affect ex-ante incentives to perform R\&D, ex-post sequential invention, and the type of invention firms pursue
    
\end{frame}

\begin{frame}{Potential effects of sequential innovation}
    
The sequential nature of innovation, where IP affects incentives to invent directly today and by changing the nature of competition tomorrow, can lead to some counterintuitive results

\vspace{3mm}

\begin{itemize}
    \item Acemoglu and Akcigit (2012): firms who invent with large technological leads should get stronger patents
    \begin{itemize}
        \item incentivizes leaders to keep working
        \item incentivizes laggards to prevent large leads from developing
    \end{itemize}
    \item Static models with one-shot inventions may miss incentive effects from endogenous dynamic market structure
\end{itemize}

\vspace{3mm}

Patent tradeoff is deeper than simply balancing monopoly distortions against the provision of quasirents to incentivize costly research
    
\end{frame}

\begin{frame}{Role of `the planner'}

If the planner knows the social value and expected R\&D cost of an invention, then they can pay the lowest-cost inventor their expenses and induce all inventions with net positive social value {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Wright 1983]}}

\vspace{3mm}

But will planners pay inventors ex-post?

\begin{itemize}
    \item Roin (2014): the patent system both prevents government from reneging on payouts after an invention appears, and leads to higher rewards to inventors whose inventions turn out to be more valuable
\end{itemize}

\vspace{3mm}

Patents help overcome asymmetric information between inventors and planners, and commitment problems on the part of the government
    
\end{frame}

\begin{frame}{Ex-post rewards}
    
Ex-post, it may be possible to reduce the deadweight loss of monopoly pricing by patent holders

\vspace{3mm}

Kremer (1998) proposes a ``patent buyout'' where patents are sometimes forced into a public auction and the planner sometimes pays a premium on the auction price in exchange for bringing the invention into the public domain
\begin{itemize}
    \item Probabilistic aspects ensure that rival firms with information about the value of the invention have an incentive to bid
    \item Thus, the buyout price does not suffer from a government commitment problem where its incentive to pay falls once invention exists
\end{itemize}

\vspace{3mm}

More on ex-post rewards and buyouts: Shavell and van Ypersele (2001), Khan (2015), and Galasso (2020)

\end{frame}

\begin{frame}{Inefficiencies in direction of research}

\begin{itemize}

\item Nelson (1959): Firms will perform too little basic research.
    \begin{itemize}
        \item Uses of basic research are broad, thus unlikely to have value to a firm
        \item Basic research is hard to embody in a product, thus hard to patent and license
    \end{itemize}
    
\item Dasgupta and Maskin (1987): The existence of wastefully similar inventions between two firms implies that research portfolios are often too similar.

\item Acemoglu (2012): Inventions whose value comes predominantly from follow-on innovations are underprovided


\item Bryan and Lemus (2017): Distortions in direction of research are not wholly fixed with policies like patents and research subsidies

\item Hopenhayn and Squintani (2021): ``Hot'' technologies attract too many inventors since none weigh the costs of rivals having to redirect research after a successful invention

\end{itemize}
    
\end{frame}

\begin{frame}{Patents smooth market for technology}

Inventors differ in their capacity to successfully commercialize an invention {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Arora et al. 2001, Teece 1986]}}

\vspace{3mm}

Joint profits are often higher following licensing, since the incumbent and the innovator can act as a monopoly {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Gilbert and Newbery 1982]}}
\begin{itemize}
    \item Firms may be reluctant to disclose their technology to potential partners and licensors if they think the technology will be expropriated
    \item Patents limit this risk, by providing legal remedy
\end{itemize}

\vspace{3mm}

However, the possibility of licensing could also distort incentives on margins which affect bargaining over licenses (see, for example, Gans and Stern (2000) on superfluous research)
    
\end{frame}

\begin{frame}{Secrecy}

Firms face a choice between receiving protection for a limited time or relying on secrecy with weaker protection but potentially more time

\vspace{3mm}
    
\begin{itemize}
    \item Anton and Yao (2004) finds that patents are worth it for minor inventions, but perhaps not for major ones
    \begin{itemize}
        \item Not getting a patent could signal confidence in a large technological lead, deterring competition
    \end{itemize}
    \item Scotchmer and Green (1990) notes that secrecy is useful to dynamic invention as well
    \begin{itemize}
        \item A firm that patents every minor step gives rivals information to create similar inventions that are not covered by the initial patent
    \end{itemize}
    \item Henry and Ponce (2011) shows that the ability to disclose, in addition to the ability to keep secrets, is useful for appropriating rents.
\end{itemize}
    
\end{frame}

\begin{frame}{Avoiding secrecy}
    
For new technologies: incentivizing the development of complements or micro-improvements may be more important for profit than expropriating rents from licensing the underdeveloped technology

\vspace{3mm}

\begin{itemize}
    \item For example, Allen (1983) documents iron producers in 19th century England improving the blast furnace in the absence of patenting
    \begin{itemize}
        \item Slowing down collective industry improvement with patenting may have led to lower profit 
        \item Growth in ``size of the pie'' results in more profit for individual firms
    \end{itemize}
    \item Nuvolari and Sumner (2013) finds a similar process of collective innovation in the case of porter beer.
    \item Bessen and Maskin (2009) theorizes that firms may actually be strictly better off if all firms are unable to patent their improvements
\end{itemize}

\end{frame}

\begin{frame}{Enforcement of IPR}
    
\textit{Who} should enforce intellectual property rules?

\vspace{5mm}

\begin{itemize}
    \item Should countries enforce patents from abroad?
    \begin{itemize}
        \item Prior to 1883 Paris Convention, patents were largely unenforced outside of their initial jurisdiction as countries tried to reach the global frontier of innovation {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Moser et al. 2011]}}
    \end{itemize}
    
\vspace{5mm}
    
    \item Should poor countries enforce patents at all?
    \begin{itemize}
        \item Deardorff (1992): Expanding patent protection globally isn't likely to increase welfare due to monopoly pricing
        \item Diwan and Rodrik (1991) counters: Lack of IP rights in developing countries will distort inventor effort away from technologies that benefit those countries
    \end{itemize}
\end{itemize}
    
\end{frame}

\section{Intellectual property: evidence}

\begin{frame}
    \frametitle{Outline}
    \tableofcontents[currentsection]
\end{frame}

\begin{frame}{Empirical evidence on patents}

Patents are traditionally seen as trading off the benefit of more invention against the cost of higher prices during the life of the patent

\begin{itemize}
    \item The more effective patent laws are at encouraging research investments, the stronger the case for stronger IP rights
    \item Historical literature: market incentives help encourage innovation, and patents help facilitate the market for technologies {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Khan and Sokoloff 1993, Lamoreaux and Sokoloff 1999, Lamoreaux et al. 2013]}}
\end{itemize}
    
However, several papers failed to uncover evidence that stronger patents induce more R\&D {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Lerner 2009, Moser 2005, Sakakibara and Branstetter 2001]}}
    
\end{frame}

\begin{frame}{Patents by industry}

Industries that stand out as exceptions to the nonimportance of patents:
\begin{itemize}
    \item Pharmaceuticals
    \begin{itemize}
        \item Surveys and data are consistent with patents having an economically important effect on R\&D {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Cohen et al. 2000, Levin et al. 1987, Mansfield 1986, Budish et al. 2015]}}
    \end{itemize}
    \item Agriculture
    \begin{itemize}
        \item The introduction of patent protection for plant biotechnology in the late 1980s increased the development of novel plant varieties
        \item Further, US counties more exposed to the policy change saw agricultural land values and profits increase {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Moscona 2020]}}
    \end{itemize}
    \item Chemicals
    \begin{itemize}
        \item Evidence from surveys shows relatively heavy patent use for chemicals, including for blocking rivals {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Cohen et al. 2000, Levin et al. 1987, Mansfield 1986]}}
    \end{itemize}
\end{itemize}

\end{frame}

\begin{frame}{Stunting follow-on innovation}

Intellectual property rights in the form of patents or copyright-type agreements can hinder follow-on innovation {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Galasso and Schankerman 2015, Williams 2013]}}

\vspace{3mm}

\begin{itemize}
\item These results are collectively in line with Green and Scotchmer (1995)
\item Patents are more likely to be harmful when the precise follow-on inventions they cover are unclear, or when follow-on inventors are worried about holdup from ``submarine patents''
\item The assumption that patents hinder follow-on innovation has informed a recent set of important US Supreme Court decisions restricting the set of discoveries eligible for patents
\end{itemize}
    
\end{frame}

\begin{frame}{Measuring patenting and innovation}

Finding appropriate data to analyze the effects of patent policy has been challenging

\begin{itemize}
    \item While researchers frequently use patents to measure innovation, changes in patent law can affect costs and benefits of filing for patent protection
    \item Since these costs/benefits affect the propensity to patent, changes in patenting and changes in innovation are often conflated
    \item Example: Abrams (2009) studies patent term extensions from TRIPS
    \begin{itemize}
        \item Abrams tests whether technology classes with longer patent term extensions saw increases in patent counts
        \item Hard to interpret results since the policy change altered incentives to file for patents on existing research investments
    \end{itemize}
\end{itemize}
    
\end{frame}

\begin{frame}{Measuring patenting and innovation}

Two clever solutions to this concern
\vspace{3mm}

Lerner (2009)
\begin{itemize}
    \item Analyzes changes in patenting behavior of inventors both in a country experiencing a patent law change \textit{and in foreign markets} where no such measurement challenge arises
    \item Finds little response of innovation to strengthened patent laws
\end{itemize}

\vspace{3mm}
Galasso and Schankerman (2015)
\begin{itemize}
    \item Analyses how follow-on innovation (as measured by patent citations) change when a focal patent is invalidated
    \item Finds that citations to invalidated patents rise substantially following invalidation, suggesting patent-related frictions which harm sequential innovation
\end{itemize}
    
\end{frame}

\begin{frame}{Using real-world outcomes}
    
Another way to accurately measure how innovation changes in response to patent policy: link patents with real-world outcomes

\vspace{4mm}

\begin{itemize}
    \item Moser, Ohmstedt, and Rhode (2018) use the yields of plants covered by plant patents
    \item Murray and Stern (2007) use citations to scientific papers disclosing the same knowledge as a given set of patents
    \item Sampat and Williams (2019) link patents with the genes they claim as intellectual property
\end{itemize}
    
\end{frame}

\begin{frame}{Empirical variation}

\begin{itemize}
    \item Economists also need sources of empirical variation to analyze the effects of IP rights
    \item This is challenging due to the uniform protection provided by the patent system across technologies and countries
\end{itemize}

\vspace{3mm}

Some historical cross-country variation is useful:

\begin{itemize}
    \item Many papers test how country-level patent protection affects country-specific drug launch decisions {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Cockburn et al. 2016, Duggan et al. 2016, Kyle and Qian 2014]}}
    \item Moser (2005) tests how country-specific patent laws affect the direction of technology change within a country
\end{itemize}

\vspace{3mm}

Still, inventions are often developed for a global market, and patent law changes in ``small'' countries likely have little effect on global incentives for innovation

    
\end{frame}

\begin{frame}{New empirical strategies}

Recent empirical tests on the effects of IP rights have leveraged administrative data 

\vspace{3mm}

\begin{itemize}
    \item Galasso and Schankerman (2015) leverages the quasi-random assignment of judges to cases at the US Count of Appeals for the Federal Circuit to study patent invalidation effects
    \item Sampat and Williams (2019) leverages the quasi-random assignment of patent applications to patent examiners at the USPTO to study patent grant effects
    \begin{itemize}
        \item The Sampat-Williams approach has been further improved by Feng and Jaravel (2020) and Righi and Simcoe (2019)
    \end{itemize}
\end{itemize}
    
\end{frame}

\begin{frame}{Areas for future work}

\begin{itemize}
    \item Patent scope {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Sakakibara and Branstetter 2001, Lerner 1994]}}
    \vspace{1mm}
    \item Costs and benefits of the disclosure function in the patent system {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[Ouellette 2012, Roin 2005]}}
    \vspace{1mm}
    \item Alternatives to patents for encouraging innovation {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[e.g. Anton and Yao 1994, Gallini and Scotchmer 2002]}}
    \begin{itemize}
        \item e.g. prizes, contests, patent buyouts, and laissez faire alternatives such as secrecy and first-mover advantage
    \end{itemize}
    \vspace{1mm}
    \item The role of excludability and open access {\scriptsize \textcolor{red!75!green!50!blue!25!gray}{[e.g. Bryan and Ozcan \textit{forthcoming}, Williams 2013]}}
\end{itemize}

\end{frame}

\begin{frame}
\frametitle{Summing up}

Patent theory:
\begin{itemize}
    \item Pros: patents reward inventors for socially valuable ideas and force disclosure to encourage follow-on innovation
    \item Cons: patent holders can charge above marginal cost, patents can limit diffusion of ideas, and they can distort the direction of innovation
\end{itemize}

\vspace{2mm}

Patent empirics:
\begin{itemize}
    \item Identifying causal links between patents and innovation remains challenging, though new methods are developing
    \item Existing literature shows mixed evidence on the effect of patents on innovation
    \begin{itemize}
        \item Patents seem important in pharmaceuticals and agriculture, but lack positive impact elsewhere and potentially stunt follow-on innovation
    \end{itemize}
\end{itemize}

\end{frame}

\end{document}