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DIME Working Papers series on Intellectual Property Rights 11 - 15

WP11: Non Rivalry and Complementarity in Computer Software

Luigi Marengo, SSSUP Italy
Corrado Pasquali, Universita' di Teramo Italy

In this paper we contend that – contrary to what argued by a vast part of the literature – computer software and, more in general, digital goods (i.e. symbolic strings on an electronic medium with some economic value) do not present the characteristics of a public good as they do not suffer from lack of rivarly and excludability any more than other durable goods which are regularly allocated on competitive markets.

We argue instead that the “market allocation problem” – if any – with digital goods does not arise from their public nature but from some peculiar characteristics of the production technology.

The latter presents the nature of a typical problem solving activity as far as the production of the first unit is concerned, this means that innovative activities in computer software are characterized by high degrees of interdependencies, cumulativeness, sequentiality, path dependence and, more in general, sub-optimality arising from imperfect problem decompositions. As far as the production of further units is concerned, we observe instead high (but not infinite) expansibility and perfect codification (lack of any tacit dimension) which make diffusion costs rapidly fall.

Given such claims, we argue that a standard “Coasian” approach to property rights, designed to cope with the externalities of semi-public goods may not be appropriate for computer software, as it may decrease both ex-ante incentives to innovation and ex-post efficiency of diffusion. On the other hand the institutional definition of property rights may strongly influence the patterns of technological evolution and division of labor in directions which are not necessarily optimal.

WP12: Patents, Inducement Prizes, and Contestant Strategy: Do Patents "Crowd Out" Prizes?

Jerome Davis, Dalhousie University Canada
Lee N. Davis, Copenhagen Business School

Debate over the merits of patents versus inducement prizes has tended to ignore the signaling roles of patents, and totally ignores the impact of patent signaling on prize contests. This paper asks: How does patent signaling affect the strategic choices of firms considering entering prize contests?

First, we consider contests that do not allow patenting, then contests that do. If patenting is not allowed, we argue, patent-holders, both internal and external to the contest, can adversely impact prize contests by claiming prize winner violation of their patents, and suing for damages. The likelihood of such challenges being made can deter entry, particularly in contests requiring large sunk costs. Furthermore, the firm’s decisionmaking process will discriminate against entering prize contests and favor R&D projects with patentable outcomes. Together, these problems may circumscribe any future wider role for prize contests, and limit their major putative welfare advantage: the ability to place prize winning solutions into the public domain. In contests where entrants may patent their inventions, entry is subject to basically the same problems as above (although such contests may carry some advantages as regards contest design). Our overall conclusion is that prize contests are liable to fail due to the lack of potential entrants, particularly as regards entry on the part of larger commercial firms.

WP13: The Economics of Digital Goods: Selling vs. Renting Music Online

Thierry Rayna, University of Bristol & GREQAM

 The aim of this article is to use the concept of durable good to analyse the market of online music. Our goal is to find theoretical elements explaining the coexistence of selling and renting strategies, and to assess the respective performance of these two types of strategies.

In a first part, we make a review of the literature on the durable goods and show that even though renting the durable good is often the winning strategy in the case of a monopoly, in the case of an oligopoly, the selling strategy is usually better. We then study the market of online music and show that the reason behind firms’ decision to rent, rather than to sell, music is the presence of switching costs for the consumers. Both renting and selling strategies are then assessed, both theoretically and empirically, in regards to their robustness to piracy. Last but not least, the impact of durability on selling firms is also analysed.

WP14: Nanotechnology: the revolutionary technology seen from the U.S. and European perspective.

Luca Escoffier,Queen Mary IP Reserach Institute London

In nowadays knowledge-based society we are facing stunning developments in the technology sector and what this article will try to focus on is the burgeoning field of nanotechnology1 and nanofabrication. The former, actually, is known from the birth of the “new” chemistry2 whereas the latter is concerned with the manufacturing of nanomaterials and involves a kind of research whose roots go back to the early 1980s and which is putting under the spotlight many new strikingly impressive discoveries and inventions3 thanks to our finest researchers’ endeavours.

As we all know, though, technology cannot go further without proper investments, both form the public and private sector. In this paper, thus, we will see what are the nanotechnology-related governmental investment plans and especially those made by the US and Europe to foster this futuristic field of technology and what are the concerns which surround its usage and further development.

Nanotechnology is leading us to a new era made of tiny devices and “miraculous” compounds which will definitely change our lives. These inventions surely deserve IP protection but their very nature is raising many concerns among IP professionals since patent law has to be somehow interpreted in a new way due to their nature: the importance of patenting and its developments in this sector made by the USPTO and the EPO is what this article will try to investigate.

WP15: In Search of a Useful Theory of the Productive Potential of Intellectual Property Rights

Birgitte Andersen, Birkbeck University of London
Sue Konzelmann, Birkbeck University of London

It is a problem that mainstream theory, which has informed the belief systems regarding the operation as well as the predicted social and economic effects of IPR systems, cannot explain why the IPR system generates different performance results and varying potential for growth across the firms, sectors and nations participating in the IPR system.

This paper sketches a theory of the ‘Productive Potential of Intellectual Property Rights’ which is able to do just that. Focusing on the ‘rules of the game’ embedded in the institutional IPR environment and the ‘play of the game’ within the alternative institutions of IPR governance, the paper emphasizes the importance of the nature or quality of the relationships among IPR stakeholders and the contribution of such relationships to the processes of financial and non-financial value creation and distribution from IPRs. The central role of cooperation, asymmetric relationships, and the effective resolution of conflicting interests amongst stakeholders is addressed. It is suggested that the proposed framework provides a better starting point for the design of IPR policy and management.

 

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