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<title>Law and Tech Research feed - Scotchmer</title>
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    <title>Ideas and Innovations: Which Should Be Subsidized?</title>
    <description><![CDATA[
        The Bayh-Dole Act allows universities to commercialize their research. University laboratories therefore have two sources of funds: direct grants from the government and funds from commercialization. In addition to giving direct subsidies to university laboratories, the government also subsidizes the commercial sector, for example, through tax credits. Subsidies to commerce contribute indirectly to the university's research budget, because they increase the profit from commercialization. This paper investigates the optimal mix of direct and indirect subsidies to the university, in a context where the role of university research is to turn up "ideas" for commercial investments, and the role of commerce is to turn the ideas into innovations. It also asks whether there is an argument for protecting "ideas" as well as commercializations, as is authorized by the Bayh-Dole Act. 
    ]]></description>
    <link>http://www.law.berkeley.edu/11204.htm</link>
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    <pubDate>Sat, 05 Feb 2011 09:00:00 -0400</pubDate>
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    <title>Verifiability and Group Formation in Markets</title>
    <description><![CDATA[We consider group formation with asymmetric information. Agents have unverifiable characteristics as well as the verifiable qualifications required for memberships in groups. The characteristics can be chosen, such as strategies in games, or can be learned, such as skills required for jobs. They can also be innate, such as intelligence. We assume that the unverifiable characteristics are observable ex post (after groups have formed) in the sense that they may affect the output and utility of other agents in the group. They are not verifiable ex ante, which means that prices for memberships cannot depend on them, and they cannot be used for screening members. The setup includes problems as diverse as moral hazard in teams, screening on ability, and mechanism design. Our analysis, including the definition of equilibrium and existence, revolves around the randomness in matching. We characterize the limits on efficiency in such a general equilibrium, and show that a sufficiently rich set of group types can ensure the existence of an efficient equilibrium.<BR><BR>Link: <A href="http://socrates.berkeley.edu/~scotch/groups-77.pdf">http://socrates.berkeley.edu/~scotch/groups-77.pdf</A>]]></description>
    <link>http://www.law.berkeley.edu/10076.htm</link>
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    <pubDate>Mon, 11 Oct 2010 09:00:00 -0400</pubDate>
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    <title>Risk Taking and Gender in Hierarchies </title>
    <description><![CDATA[In a labor market hierarchy, promotions are affected by the noisiness of information about the candidates. I study the hypothesis that males are more risk taking than females, and its implications for rates of promotion and abilities of survivors. I define promotion hierarchies with and without memory, where memory means that promotion depends on the entire history of success. In both types of hierarchies, the surviving risk takers will have lower average ability whenever they have a higher survival rate. Further, even if more risk takers than non risk takers are promoted in the beginning of the hierarchy, that will be reversed over time. The risk takers will eventually have a lower survival rate, but higher ability. As a consequence of these differences, the various requirements of employment law cannot simultaneously be satisfied. Further, if promotion standards are chosen to maximize profit, the standards will reflect gender in ways that are difficult to distinguish from discriminatory intent.]]></description>
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    <pubDate>Sun, 11 Jul 2010 09:00:00 -0400</pubDate>
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    <title>Cap-and-Trade, Emissions Taxes, and Innovation </title>
    <description><![CDATA[Emissions taxes and carbon caps can both lead to efficient production of energy, in the sense of controlling carbon emissions to the extent that is efficient with existing technologies. However, the regulatory policy has a second objective, which is to create incentives to develop lower-carbon technologies. With both objectives in mind, does one policy dominate the other? The answer depends partly on whether the regulated price of energy is in the elastic or inelastic part of the demand curve. It also depends on the size of the intended improvement. Under tax regulation, an innovator can always profit from diffusing the clean technology to all producers. This is not true under a carbon cap, because diffusion expands energy supply, reducing the price of energy and of allowances, and eroding the producers' willingness to pay for licenses. Under cap-and-trade regulation, the regulator has less ability to control the price of energy while ensuring productive efficiency (full diffusion). Because there is little incentive to invest in a larger improvement than will be fully diffused, cap-and-trade regulation limits innovation in a way that is avoided by a tax. ]]></description>
    <link>http://www.law.berkeley.edu/10074.htm</link>
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    <pubDate>Thu, 27 May 2010 09:00:00 -0400</pubDate>
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    <title>Openness, Open Source, and the Veil of Ignorance </title>
    <description><![CDATA[Open source collaborations are increasingly among commercial firms whose interest is profit. Why would profit-motivated firms voluntarily share code? One reason is that cost reductions can outweigh increases in rivalry. This is especially persuasive when the contributors make complementary products. However, cost reductions do not explain why open source is a more profitable way of sharing than other forms of licensing. Why would firms use an inflexible contract like the GPL? I present a model that shows how open source licensing can lead to higher industrywide profit than would result if a first innovator could choose the most profitable license once it finds itself in the position of first innovator. From behind a veil of ignorance, that is, not knowing which firm will be first, open source licensing creates higher expected profit for the industry as a whole, and thus for each firm, than if first innovators were allowed to choose. ]]></description>
    <link>http://www.law.berkeley.edu/10075.htm</link>
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    <pubDate>Tue, 11 May 2010 09:00:00 -0400</pubDate>
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    <title>Scarcity of Ideas and R&amp;D Options: Use it, Lose it or Bank it </title>
    <description><![CDATA[We investigate rewards to R&amp;D in a model where substitute ideas for innovation arrive to random recipients at random times. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We characterize the welfare-maximizing reward structure when the social planner learns over time about the arrival rate of ideas, and when private recipients of ideas can bank their ideas for future use. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce."]]></description>
    <link>http://www.law.berkeley.edu/10077.htm</link>
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    <pubDate>Wed, 13 May 2009 09:00:00 -0400</pubDate>
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    <title>Profit Neutrality in Licensing: The Boundary Between Antitrust Law and Patent Law </title>
    <description><![CDATA[We address the patent/antitrust conflict in licensing and develop three guiding principles for deciding acceptable terms of license. Profit neutrality holds that patent rewards should not depend on the rightholder's ability to work the patent himself. Derived reward holds that the patentholder's profits should be earned, if at all, from the social value created by the invention. Minimalism holds that licenses should not be more restrictive than necessary to achieve neutrality. We argue that these principles are economically sound and rationalize some key decisions of the twentieth century such as General Electric and Line Material. ]]></description>
    <link>http://www.law.berkeley.edu/10217.htm</link>
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    <pubDate>Fri, 29 Feb 2008 09:00:00 -0400</pubDate>
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    <title>Digital Rights Management and the Pricing of Digital Products</title>
    <description><![CDATA[As it becomes cheaper to copy and share digital content, vendors are turning to technical protections such as encryption. We argue that if protection is nevertheless imperfect, this transition will generally lower the prices of content relative to perfect legal enforcement. However, the effect on prices depends on whether the content providers use independent protection standards or a shared one, and if shared, on the governance of the system. Even if a shared system permits content providers to set their prices independently, the equilibrium prices will depend on how the vendors share the costs, and may be higher than with perfect legal protection. We show that demand-based cost sharing generally leads to higher prices than revenue-based cost sharing. Users, vendors and the antitrust authorities will typically have different views on what capabilities the DRM system should have. We argue that, when a DRM system is implemented as an industry standard, there is a potential for collusion through technology. ]]></description>
    <link>http://www.law.berkeley.edu/10314.htm</link>
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    <pubDate>Wed, 09 Aug 2006 09:00:00 -0400</pubDate>
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    <title>Still Looking for Lost Profits: The Case of Horizontal Competition </title>
    <description><![CDATA[When infringement of a patent dissipates profit relative to the licensing agreement that would otherwise occur, damages under the lost-profit rule deter infringement, and otherwise not. We develop this point in a general model and give two examples. However, joint profit might not be dissipated by infringement. An important example is where there are restrictions on licensing that arise from competition policy. ]]></description>
    <link>http://www.law.berkeley.edu/10315.htm</link>
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    <pubDate>Sun, 25 Jun 2006 09:00:00 -0400</pubDate>
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    <title>Open Source Software: The New Intellectual Property Paradigm</title>
    <description><![CDATA[Open source methods for creating software rely on developers who voluntarily reveal code in the expectation that other developers will reciprocate. Open source incentives are distinct from earlier uses of intellectual property, leading to different types of inefficiencies and different biases in R&amp;D investment. Open source style of software development remedies a defect of intellectual property protection, namely, that it does not generally require or encourage disclosure of source code. We review a considerable body of survey evidence and theory that seeks to explain why developers participate in open source collaborations instead of keeping their code proprietary, and evaluates the extent to which open source may improve welfare compared to proprietary development.]]></description>
    <link>http://www.law.berkeley.edu/10319.htm</link>
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    <pubDate>Thu, 18 May 2006 09:00:00 -0400</pubDate>
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    <title>Intellectual Property </title>
    <description><![CDATA[This chapter of the forthcoming Handbook of Law and Economics (A.M. Polinsky &amp; S. Shavell (eds.)) provides a comprehensive survey of the burgeoning literature on the law and economics of intellectual property. It is organized around the two principal objectives of intellectual property law: promoting innovation and aesthetic creativity (focusing on patent and copyright protection) and protecting integrity of the commercial marketplace (trademark protection and unfair competition law). Each section sets forth the economic problem, the principal models and analytical frameworks, application of economic analysis to particular structural and doctrinal issues, interactions with other legal regimes (such as competition policy), international dimensions, and comparative analysis of intellectual property protection and other means of addressing the economic problem (such as public funding and prizes in the case of patent and copyright law and direct consumer protection statutes and public enforcement in the case of trademarks). ]]></description>
    <link>http://www.law.berkeley.edu/10327.htm</link>
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    <pubDate>Fri, 15 Jul 2005 09:00:00 -0400</pubDate>
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    <title>The Political Economy of Intellectual Property Treaties </title>
    <description><![CDATA[Intellectual property treaties create two types of obligations: for national treatment of foreign inventors and for certain harmonized protections. I investigate both the incentive to join such treaties and the incentive to harmonize. As compared to an equilibrium in which the countries' policy makers make independent choices, harmonization will generally strengthen protections. This analysis recognizes that public sponsorship is sometimes an efficient alternative to intellectual property. However, there are no institutions to harmonize public spending, and there are no international mechanisms to repatriate the spillovers it generates. As a consequence, there may be too little public sponsorship and too much intellectual property. A country's inclination to strengthen harmonized protections will depend both on its innovativeness (positively) and on the size of its domestic market (negatively). ]]></description>
    <link>http://www.law.berkeley.edu/10170.htm</link>
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    <pubDate>Thu, 24 Jun 2004 09:00:00 -0400</pubDate>
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    <title>Procuring Knowledge</title>
    <description><![CDATA[There is growing public interest in alternatives to intellectual property including, but not limited to, prizes and government grants. We argue that there is no single best mechanism for supporting research. Rather, mechanisms can only be compared within specific creative environments. We collect various historical and contemporary examples of alternative incentives, and relate them to models of the creative process. We give an explanation for why federally funded R&amp;D has moved from an intramural activity to largely a grant process. Finally, we observe that much research is supported by a hybrid system of public and private sponsorship, and explain why this makes sense in some circumstances.]]></description>
    <link>http://www.law.berkeley.edu/12770.htm</link>
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    <pubDate>Sat, 23 Aug 2003 09:00:00 -0400</pubDate>
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    <title>Procuring Knowledge </title>
    <description><![CDATA[There is growing public interest in alternatives to intellectual property including, but not limited to, prizes and government grants. We argue that there is no single best mechanism for supporting research. Rather, mechanisms can only be compared within specific creative environments. We collect various historical and contemporary examples of alternative incentives, and relate them to models of the creative process. We give an explanation for why federally funded R&amp;D has moved from an intramural activity to largely a grant process. Finally, we observe that much research is supported by a hybrid system of public and private sponsorship, and explain why this makes sense in some circumstances.]]></description>
    <link>http://www.law.berkeley.edu/10316.htm</link>
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    <pubDate>Mon, 18 Aug 2003 09:00:00 -0400</pubDate>
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    <title>The Core and Hedonic Core: Reply to Wooders (2001), with Counterexamples </title>
    <description><![CDATA[In response to Wooders (2001), I review the contributions of Engl and Scotchmer (1996) regarding monotonicity and the hedonic core, show how our contributions diverge from those previously in the literature, and highlight the importance of our assumptions by giving counterexamples, particularly to related results of Wooders. ]]></description>
    <link>http://www.law.berkeley.edu/10317.htm</link>
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    <pubDate>Thu, 06 Mar 2003 09:00:00 -0400</pubDate>
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    <title>Damages and Injunctions in the Protection of Proprietary Research Tools </title>
    <description><![CDATA[We investigate how liability rules and property rules protect intellectual property. Infringement might not be deterred under any of the enforcement regimes available. However, counterintuitively, a credible threat of infringement can actually benefit the patentholder. We compare the two doctrines of damages, lost profit (lost royalty) and unjust enrichment, and argue that unjust enrichment protects the patentholder better than lost royalty in the case of proprietary research tools. Both can be superior to a property rule, depending on how much delay is permitted before infringement is enjoined. For other proprietary products (end-user products, cost-reducing innovations), these conclusions can be reversed. . ]]></description>
    <link>http://www.law.berkeley.edu/10318.htm</link>
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    <pubDate>Fri, 24 Nov 2000 09:00:00 -0400</pubDate>
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    <title>The Independent-Invention Defense in Intellectual Property</title>
    <description><![CDATA[Patents differ from other forms of intellectual property in that independent invention is not a defense to infringement. We argue that the patent rule is inferior. First, the threat of entry by independent invention would induce patentholders to license the technology, lowering the market price. Provided independent invention is as costly as the original cost of R&amp;D, the market price will still be high enough to cover the patentholder's costs. Second, a defense of independent invention would reduce the wasteful duplication of R&amp;D effort that occurs in patent races. In either case, the threat of independent invention creates a mechanism that limits patentholders' profits to levels commensurate with their costs of R&amp;D. ]]></description>
    <link>http://www.law.berkeley.edu/10168.htm</link>
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    <pubDate>Fri, 26 Feb 1999 09:00:00 -0400</pubDate>
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    <title>On the Optimality of the Patent Renewal System </title>
    <description><![CDATA[The patent system is mainly a renewal system: the patent life is chosen by the patentee in return for fees. I ask whether such a system can be justified by asymmetric information on costs and benefits of research. In such a model I show that renewal mechanisms (possibly with subsidies) are equivalent to direct revelation mechanisms and therefore cannot be improved on, regardless of the objective function. Under plausible circumstances, patents should have a uniform life, rather than varying in length, as typically occurs under a renewal system. ]]></description>
    <link>http://www.law.berkeley.edu/10320.htm</link>
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    <pubDate>Mon, 22 Feb 1999 09:00:00 -0400</pubDate>
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    <title>Patent Breadth, Patent Life, and the Pace of Technological Progress </title>
    <description><![CDATA[In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a noninfringing innovation displaces its product in the market. We define the length of time until one of these happens as the effective patent life, and show how it depends on patent breadth. We distinguish "lagging" breadth, which protects against imitation, from "leading" breadth, which protects against new improved products. We compare two types of patent policy with leading breadth: (i) patents are finite but very broad, so that the effective life of a patent coincides with its statutory life, and (ii) patents are long but narrow, so that the effective life of a patent ends when a better product replaces it. The former policy improves the diffusion of new products, but the latter has lower R&amp;D costs. ]]></description>
    <link>http://www.law.berkeley.edu/10321.htm</link>
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    <pubDate>Wed, 27 Jan 1999 09:00:00 -0400</pubDate>
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    <title>Protecting Early Innovators: Should Second-Generation Products be Patentable? </title>
    <description><![CDATA[Incentives to develop basic technologies are greater if the patentholder profits from applications or other second-generation products. Assuming that such products infringe the basic patent and that there is not much delay between the innovations, I argue that (i) patents on second-generation products are not necessary to encourage their development and (ii) the patentholder of the basic technology collects a larger share of the profit if applications or other second generation products are not patentable. ]]></description>
    <link>http://www.law.berkeley.edu/10322.htm</link>
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    <pubDate>Wed, 08 Jul 1998 09:00:00 -0400</pubDate>
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