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The Problem of Cumulativeness

The Problem of Cumulativeness. Basic problem: It is hard to compensate an early innovator for his contributions to later innovators. In fact, the market punishes early innovators for teaching technologies to later innovators Can IP solve this problem? What is the problem with

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The Problem of Cumulativeness

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  1. The Problem of Cumulativeness • Basic problem: It is hard to compensate an early innovator for his contributions to later innovators. In fact, the market punishes early innovators for teaching technologies to later innovators • Can IP solve this problem? What is the problem with Strong protection to first innovator: everything infringes Weak protection to first innovator: nothing infringes • Examples: laser, indigenous knowledge, light bulbs • Basic and Applied Research • Research Tools and Inventions • Quality Ladders

  2. Example: Masers and Lasers • Laser or Maser: Device to create a coherent (single direction, single frequency) electromagnetic wave. Has high energy, is useful for lots of things, like reading and writing CD’s, eye surgery, carrying info in fiber-optics. • Scientific Underpinning: Einstein 1916 paper. Pointed out that coherent photons would be emitted from an “excited” atom when bombarded with a single photon (amplification). • First Implementation, the Maser (Charles Townes 1954). In the Microwave part of the spectrum (long wave lengths) • Second Implementation, the Laser (Towns and Schawlow, idea published 1958, patent issued 1960).

  3. The 1960’s: Nobel prizes. New mediums for excited atoms (solid-state, gas, ruby, in the 1980’s semiconductors) • 1960’s to 1980’s New uses surgery, printers, communications, spectroscopy • Patent battles I: Townes’ maser patent assigned to Res. Corp. Townes’&Schawlow’s laser assigned to Bell Lab Research Corp sued Bell Lab (blocking patents) • Patent battles II: Gordon Gould, laser contender, applied for laser patent 1957, awarded 1977, after a partial revocation of the Townes/Schawlow laser patent.

  4. Lessons of the Laser wars • Cumulativeness: Science (Einstein) to Basic Research (Maser) to War Research (radar) to Applications (Laser plus uses) http://www.patentweb.de/laser/patents.html • Who deserves credit? (Everyone here.) • Who gets the profit? Townes made about $1m total. Gould patents eventually made about $17m per year. Better to be late, but not never. (BTW, CD’s) Einstein earned nothing. Did any of these inventors need “incentives?” • Importance of reduction to practice: There was delay in filing; was a description enough? Working model?

  5. Indigenous Knowledge: Basmati Rice • Basmati Rice: Developed over generations in Pakistan, India and elsewhere. • Adapted by genetic methods to growing conditions in Texas (what about water!?) • Challenges the export market of Pakistan. • How should we think about this? Moral rights? Economic rights? Equity versus efficiency?

  6. Neem Tree, also India • Medicinal and pesticide properties • The oil is unstable, so traditional use involves culling the oil, and using immediately. • Biotech firm found a way to stabilize the oil, re-exports it to India. • How should we think about this?

  7. Light Bulbs • Humphrey Davi 1801 patented electric incandescent light made with a current between strips of platinum. Not useful; filament burned too quickly. • Remaining development: find the right filament, and keep it from burning (vacuum bulb). Eventual solution was carbon filaments, then tungsten • 1860 Swan patent. Carbon filament in vacuum bulb. Still inefficient, but is the design still used. • 1878 Edison, carbonised cotton thread. Lasted longer. • Then carbonized bamboo, then tungsten 1907 • Infringement fight betw Swan and Edison ended in a joint company 1883.

  8. Pneumatic Tyres • 1845 patent on air-filled leather tire. Didn’t work very well. • Then solid vulcanized rubber. • 1888, John Dunlop put the two ideas together: rubber inner tube

  9. Research Tools and Inventions Tool 1 (insert genes) Tool 2 (genetic trait) Application Or Use (germplasm) Tool 3 (expression gene)

  10. Complementary Goods sold by two monopolist tool owners. Each user (indexed by q) requires both tools to develop his product. The prices of the tools will end up being higher than the profit-maximizing price. Aggregate Willingness to pay net of Licensor 1’s price Aggregate Willingness to Pay PM q q

  11. Application 1 Reading/writing CDs Basic & Applied Research Research Tool or Basic Research Laser Application 2 Laser Surgery (1) Will infringement deter investment in applications? (2) Is the 2nd innovator better off without infringement? (3) If applications are not patentable, how does that affect investment? (4) What if value y is not observable? Application 3 Spectroscopy

  12. Breadth on a quality ladder (computer chips) Basic Problem: There is a large discrepancy between the profit and social value of each incremental improvement: Benefit of each improvement: /r Cost of each improvement: c Profit earned by each improvement: q1 q2 q3 q4

  13. Intellectual Property on a quality ladder. Basic Problem: There is a large discrepancy between the profit and social value of each incremental improvement: Benefit of each improvement: /r Cost of each improvement: c Flow of profit earned by each improvement: Two Tools of IP: patentable step and breadth (infringement) Solves the economic conflict (“enough” consolidation) 2 2 q1 q2 q3 q4 q5

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