The Economics of the European Patent System: IP Policy for Innovation and Competition

By He, Zi-Lin | Innovation : Management, Policy & Practice, July 2007 | Go to article overview

The Economics of the European Patent System: IP Policy for Innovation and Competition


He, Zi-Lin, Innovation : Management, Policy & Practice


THE ECONOMICS OF THE EUROPEAN PATENT SYSTEM: IP POLICY FOR INNOVATION AND COMPETITION Dominique Guellec and Bruno van Pottelsberghe de la Potterie (2007) Oxford University Press, Oxford, New York, Melbourne; Print ISBN: 978-0-19-921698-7; 266 pages; US$99.00 hardbound

In this book, two chief economists of the European Patent Office (EPO), Dominique Guellec and Bruno van Pottelsberghe de la Potterie, investigate the economics of patent systems, review the organization of EPO, and propose changes to the European patent system. This book is a landmark integration of their profound economic insights and expert knowledge of the European patent system. It is a timely contribution to the patent research literature that has so far overwhelmingly focused on the US patent system. This book can be a major reference for all stakeholders of patent systems, including economists, policy makers, and patent practitioners.

This book has three unique features. First, after a brief introduction in Chapter 1, this book gives an excellent overview of the genesis and evolution of patent systems in Chapter 2 - from the first patent law in Venice in 1474 to the current situation, including the agreement on TRIPs (Trade-Related Aspects of Intellectual Property Rights). Most readers would be amazed at the rich history that can inform today's debate on patent policy.

Second, to the best of my knowledge, this is the first book that comprehensively analyzes the various economic dimensions of patent systems. The economic rationale of patents, which is presented in Chapter 3, lays the foundation for the following chapters. Three juxtapositions in this chapter are particularly helpful to understand the economics of patents: 1) patents as a natural right vs. patents as an incentive mechanism, 2) tangible property rights to prevent the 'tragedy of the commons' by internalizing negative externalities vs. intellectual property rights to reduce future scarcity of new technology by inducing more ex ante investment, and 3) other instruments of innovation policy (e.g. public R&D, prizes, and R&D tax credits) funded through the general tax system contributed by all citizens vs. patents funded through a targeted tax charged to only buyers of the protected good. This chapter illustrates that a good patent system should strike a balance between enhancing incentive to innovate and causing deadweight loss for maximum society surplus, and between encouraging knowledge disclosure and blocking access to knowledge for further innovation. Chapter 4 further looks at the various uses of patents by firms, including licensing, patent pooling, gaining freedom to operate and blocking competitors, as well as the latest patent-based financial instruments, such as patent sale-and-lease-back and patent litigation insurance. This chapter has a strong focus on how competition policy should be deployed to rein in socially detrimental licensing practices by firms in the market for technology. Chapter 5 illustrates how the design of key parameters of patent systems, including subject matter, inventive step (equivalent to 'non-obviousness' in the US patent system), scope and duration, can tip the delicate balance that an ideal patent system is supposed to maintain. When these parameters are considered in combination, you will realize that patent systems are such a complex interlinked jigsaw puzzle.

Third, this book offers a detailed analysis of the European patent system. In Chapter 6, you will find an in-depth discussion of patenting procedures and different filing strategies at EPO. Anyone interested in obtaining a patent from the EPO should carefully read this chapter. Chapter 7 compares operations at the three main patent offices: EPO, USPTO and JPO. …

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