The Elgar Companion to the Economics of Property Rights
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The Elgar Companion to the Economics of Property Rights

Edited by Enrico Colombatto

Economics is a matter of choice and growth, of interaction and exchange among individuals. Because property rights define the rules of these interactions and the objects of exchange, it is vital to fully understand the institutions and implications of the various property-rights regimes. With over 20 original and specially commissioned chapters, this book takes the reader from the historical and moral foundations of the discipline to the frontiers of scholarly research in the field.
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Chapter 18: On Intellectual Property Rights: Patents versus Free and Open Development

Alan G. Isaac and Walter G. Park


Alan G. Isaac and Walter G. Park Introduction Intellectual property rights (IPRs) encompass a broad array of legal protections, including patent rights, copyrights, trademark rights, plant breeders’ rights, protection of trade secrets, industrial designs, layout designs for integrated circuits, and geographical indications (regarding the origin of goods and services). These legal protections serve diverse purposes and functions, and the institutions supporting them are also quite distinct. In this chapter we focus on the patent system. Patents are a primary instrument by which commercial firms secure legal rights to inventions. In the United States, the core economic justification of patents is that they improve welfare by stimulating discovery, disclosure and dissemination. However, patent systems generate both economic benefits and costs. In principle, the theoretical effects of patents on innovation depend on the institutional environment and on the nature of technology. Both academics and policy makers are aware of circumstances in which patents can adversely affect innovation. For example, in some situations, the patent system has the potential to create a thicket of fragmented, overlapping property rights which raises the costs of innovation. This chapter explores one alternative to the reliance on patents: ‘free and open’ development. We refer to a system that relies on free and open development as an ‘open innovation’ system. Open innovation systems side-step the patent thicket problem by not asserting patent rights to inventions. Open innovation systems rely on the free sharing and dissemination of knowledge. The idea that an open innovation system could successfully...

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