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The economics of intellectual property

19th Dec 2014

The UK Intellectual Property Office (UK IPO) has an economics unit that commissions interesting work into the economics of IP which deserves to be better known.

In a bid to make sure policy decisions are evidence-based, the Patent Office Economics Research Unit organises research to underpin the policy process. A list of their completed and ongoing research projects can be found here.

Completed research projects include “Patent Incentives – Returns to Patenting and the Inducement of Research and Development (R&D)” by Asish Arora and Suma Athreye (copies of the full report and an Executive Summary are available here). This report assesses the additional returns firms achieve through patenting and the effect this has on R&D.

The assessment was based on the concept that the monopoly power from a patent provides a firm with a price premium which acts as an incentive to increase R&D spending. The patent premium was calculated by Messrs Arora and Athreye using two measures; the revenue patent premium and the profit premium. The report found support for the incentive effects of patents and found positive patent premia for UK innovators. Perhaps unsurprisingly, the extent of the patent premium and the extra R&D it induces varies by the firm and sector. The premium effect appears to apply equally to younger and older firms, suggesting that patents can be as great an incentive to new innovators as to established businesses. The premium effect is around double for biotech firms than for firms carrying out R&D into computers and equipment. Given the critical nature of patent protection to the biotech industry (without patents there is very little to stop competitors taking the fruits of one’s research) that is also perhaps not surprising.

I sit on an UK IPO group (the Research Expert Advisory Group) which advises the UK IPO on its economics research, and helps it identify new areas of research. Please let me know if there is an area of research which you believe would be useful and interesting and would like suggested to the UK IPO team. Over the coming months, I will blog again on other published research on the economics of IP. Recent work includes reports on the “Eight great Technologies” identified by the UK Government as being of critical importance for the future. The UK Government has identified ‘eight great technologies’ plus a further two which will propel the UK to future growth.

These are:

  • the big data revolution and energy-efficient computing;
  • satellites and commercial applications of space;
  • robotics and autonomous systems;
  • life sciences, genomics and synthetic biology;
  • regenerative medicine;
  • agri-science;
  • advanced materials and nanotechnology;
  • energy and its storage;
  • quantum technologies;
  • the internet of things.

Reports on the patent landscape for each of these areas have been, or are being, prepared by the UK IPO Economics Research Unit.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.

Jan Vleck
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Would you like to know more? You can talk to Jan Vleck who will be able to help. Call +44 (0)20 7242 0901


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