The uninvited guest: patents on Wall Street

Robert P. Merges

Economic Review, 2003, vol. 88, issue Q4, 14 pages

Abstract: For at least the past twenty-five years, financial services industries have been creating innovative products and services without the help of patents. The 1998 State Street Bank case changed all this, making patents freely available in these industries. Will patents help or hurt financial services innovation in the long run? This article sheds some light on this issue. ; Before the advent of patents, several ?appropriability? mechanisms protected financial services innovation: ?first mover? advantages, complementary or ?cospecific? assets, and trade secrecy. Evidence suggests that, in the immediate post-patent era, financial firms? first order of business was to protect these traditional appropriability practices. This attitude explains the early push to secure a ?prior use rights? defense to protect established firms against patent claims by upstart outsiders. From a historical perspective, this reaction to the ?patent threat? tracks that of other industries: in particular, nineteenth-century railroads and the software industry of the 1980s. ; In the end, the author argues, patents are not likely to cause any real and lasting problems. Although patents may increase the costs of interchanging innovative ideas, they may bring some unintended benefits as well?by fostering spin-offs and facilitating entry by start-ups, for example. Like random shocks in the natural world, the new patent regime provides a shakeup that could bring some good but unpredictable consequences.

Keywords: Patents; Financial services industry (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.frbatlanta.org/-/media/documents/resea ... /vol88no4_merges.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedaer:y:2003:i:q4:p:1-14:n:v.88no.4

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Review from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Meredith Rector ().