Elgar Law and Entrepreneurship series
Edited by Shubha Ghosh and Robin Paul Malloy
Stuart J.H. Graham and Ted Sichelman INTRODUCTION: HOW ENTREPRENEURS USE (AND ARE AFFECTED BY) THE PATENT SYSTEM Entrepreneurs contribute significantly to economic growth in the US and global economy.1 They create new organizations, products, services, jobs and opportunities for complementary economic activities.2 Intellectual property (IP) law is an important policy lever that affects not only the opportunities for engaging in entrepreneurship, but also the success or failure of many entrepreneurial efforts.3 Economic theory holds that investments in technology development – of which entrepreneurial activities are an integral part – will be suboptimal if too little intellectual property protection exists.4 However, because entrepreneurial activity may be redirected or halted by intellectual property rights claimed by others, an equally serious impediment to investment for entrepreneurs may arise if IP protection is too strong or uncertain.5 Although a considerable body of previous work has explored the relationship between IP rights and innovation, far less scholarship has focused on the more particular relationship between IP rights and entrepreneurship. The basic economic principle underlying IP rights is that the process of developing innovative products and practices is an expensive, time-consuming, labor-intensive and risky endeavor.6 Once these innovations exist, however, they can be cheap and easy to copy.7 IP rights protect innovators from copying by ‘free riders’ and allow them to recoup the investment incurred during the creation, development and commercialization process – either directly by manufacturing and distributing products and services embodying the innovation, or indirectly through licensing to other firms that incorporate the innovation in their products...
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