Shared Rights and Technological Progress

Yuzhe Zhang () and Matthew Mitchell

No 678, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We study how best to reward innovators whose work builds on earlier innovations. Incentives to innovate are obtained by offering innovators the opportunity to profit from their innovations. Since innovations compete, awarding rights to one innovator reduces the value of the rights to prior innovators. We show that the optimal allocation involves shared rights, where more than one innovator is promised a share of profits from a given innovation. We interpret such allocations in three ways: as patents that infringe on prior art, as licensing through an optimally designed ever-growing patent pool, and as randomization through litigation. We contrast the rate of technological progress under the optimal allocation with the outcome if sharing is prohibitively costly, and therefore must be avoided. Avoiding sharing initially slows progress, and leads to a more variable rate of technological progress.

Date: 2013
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~ and nep-law
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Working Paper: Shared Rights and Technological Progress (2012)
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