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Chapter 4: Assessing the Effects of Intellectual Property Rights in Network Standards
Mark-Oliver Mackenrodt 1 Introduction This chapter analyses the effects of intellectual property protection on innovation in network markets. Assessing the pro-competitive and anti-competitive effects of intellectual property rights (IPRs) can provide important information for legal policy in several situations. Most importantly, an assessment of the economic effects of intellectual property rights is warranted if the optimal design of an intellectual property right is to be determined. Further, one might consider resorting to a competitive-effects analysis in the application and construction of intellectual property law in order to incorporate economic learning into decision making.1 Finally, the pro-competitive and anti-competitive effects of intellectual property protection are determinative in the application of antitrust law to business strategies that include the use of intellectual property rights.2 It is the main objective of intellectual property law to create incentives for innovation. However, while they increase dynamic competition, intellectual property rights also lead to a decrease in static competition. The concepts of static competition and dynamic competition are introduced in section 2 infra. Competitive pressure and incentives that are provided by intellectual property law both serve to induce innovation (see section 3 infra). The competitive pressure as well as the effects of intellectual property rights are determined by market mechanisms. In network industries, market mechanisms exhibit specific features as compared to conventional markets (see section 4 infra). In network markets, intellectual property rights exhibit strategic effects, because they can be used as an instrument to introduce incompatibility into a network market. The strategic use of intellectual...
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