Working Group on Intellectual Property, Innovation, and Prosperity

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Are “Fangs” Monopolies? A Theory of Disequilibrium Competition With Uncertainty

by Nicolas Petitvia IP2 Working Paper Series
Tuesday, April 16, 2019

This paper lays down the rudiments of a descriptive theory of competition among the digital tech platforms known as “FANGs” (Facebook, Amazon, Netflix and Google), amidst rising academic and policy polarization over the answer to what seems to be – at least at the formulation level – a simple question: are FANGs monopolies?

Liability Rules in the Internet of Things: Why Traditional Legal Relations Encourage Modern Technological Innovation

by Richard A. Epsteinvia IP2 Working Paper Series
Tuesday, January 8, 2019

To most experts on cyberspace, the Internet of Things (IoT) is an arena in which novel legal solutions are likely to prove dominant. I take the opposite position, even though—or perhaps precisely because—I have never done much specific work in this area. Contrary to the conventional wisdom, I think that any lack of specialized knowledge offers hidden advantages in working through the basic problems at a high enough level of generality to facilitate setting up a comprehensive liability regime even—perhaps especially—in an area undergoing rapid technological change.

Automatorts: How Should Accident Law Adapt to Autonomous Vehicles? Lessons from Law and Economics

by Eric Talleyvia IP2 Working Paper Series
Monday, January 7, 2019

The introduction of autonomous vehicles (AVs) onto the nation’s motorways raises important questions about our legal system’s adaptability to novel risks and incentive problems presented by such technology. A significant part of the challenge comes in understanding how to navigate the transition period, as AVs interact routinely with conventional human actors. This paper extends a familiar multilateral precaution framework from the law and economics literature by analyzing interactions between algorithmic and human decision makers. 

SEP Royalties: What Theory of Value and Distribution Should Courts Apply?

by Alexander Galetovic, Stephen Habervia IP2 Working Paper Series
Saturday, January 5, 2019

Courts are often required to determine the royalty to which the owner of a FRAND-encumbered standard essential patent (SEP) is entitled. We argue that courts should use the observed royalties charged by licensors, the market rental price of assets created by investments in R&D. This “comparables” technique is used to value virtually all classes of assets and is based on the standard theory of value and distribution, price theory.

Patent Value and Uncertain Property Rights: Implications from Patent Litigation

by Alan C. Marco, Richard D. Millervia IP2 Working Paper Series
Friday, October 26, 2018

In this study, we use carefully constructed matched samples of litigated and non-litigated patents to investigate the characteristics that predict litigation. Survival time regressions allow us to demonstrate the separate impacts of value and uncertainty on litigation. In particular, standard essential patents are more likely to be litigated than non-SEPs. However, the earlier the disclosure is made, the lower the hazard of litigation. That is, when information is provided early to the market, uncertainty is reduced and the hazard of litigation is lower. 

Global Rate-Setting: A Solution For Standards-Essential Patents

by Jorge Contrerasvia IP2 Working Paper Series
Thursday, October 25, 2018

The commitment to license patents that are essential to technical interoperability standards on terms that are fair, reasonable and non-discriminatory (FRAND) is a fundamental mechanism that enables standards to be developed collaboratively by groups of competitors. Yet disagreements over FRAND royalty rates continue to bedevil participants in global technology markets and litigation regarding compliance with FRAND commitments has led an increasing number of courts around the world to adjudicate FRAND royalty rates using very different methodologies and doctrinal approaches. 

Information versus Automation and Implications for Dynamic Pricing

by Bryan K. Bollinger, Wesley R. Hartmannvia IP2 Working Paper Series
Wednesday, October 24, 2018

Essential resources like electricity and water can experience rapidly changing demand or supply while the other side of the market is unchanged. Short-run price variation could efficiently allocate resources at these critical times, but only if consumers exhibit short-run demand elasticity. The question for firms in these markets has always been how to enable this response. Randomized control trials are increasingly used to test dynamic pricing and technologies that can assist in response by providing information and/or automated response. 

An Estimate of the Average Cumulative Royalty Yield in the World Mobile Phone Industry: Theory, Measurement and Results

by Alexander Galetovic, Stephen Haber, Lew Zaretzkivia IP2 Working Paper Series
Wednesday, February 7, 2018

An influential literature argues that dispersed patent ownership may lead to royalty stacking and excessive running royalties, thus increasing the long-run marginal cost of manufacturing phones and their prices. In order to assess this claim, we estimate the average cumulative royalty yield—the sum total of patent royalty payments earned by licensors, divided by the total value of mobile phones shipped— in the world mobile phone industry between 2007 and 2016. This is a conservative proxy of the running royalties paid in the mobile phone value chain.

Patent Applications

Citation Weighting, Patent Ranking, and Apportionment of Value for Standard-Essential Patents

by J. Gregory Sidak, Jeremy O. Skogvia IP2 Working Paper Series
Wednesday, January 10, 2018

A critical question repeatedly arises in litigation over the infringement of standard-essential patents (SEPs): What is an intellectually rigorous methodology for apportioning, across the various patents practiced in a multicomponent product, the value that the patents contribute to each enabling technology that gives the multicomponent product value?

Patently Risky: Framing, Innovation and Entrepreneurial Preferences

by Elizabeth Hoffman, David L. Schwartz, Matthew Spitzer, Eric Talleyvia IP2 Working Paper Series
Tuesday, January 9, 2018

Innovation policy balances static monopoly rights against dynamic entrepreneurial incentives. In striking this balance, researchers commonly presume that decision makers in innovative settings react to their economic environments in a manner similar to their counterparts in other contexts. This paper reports on a series of experiments that call this presumption into question. 

Pages

IP2 Website

Hoover IP2 Logo

RESOURCES

DATA WAREHOUSE
A New Dataset on Mobile Phone Patent License Royalties, September 2016 update (Excel download)
Alexander Galetovic, Stephen Haber, and Lew Zaretzki

LEGISLATION
US Copyright Law
US Code Title 35 – Patents
US Copyright Act of 1976
US Copyright Act of 1790
America Invents Act
Summary

GOVERNMENT AGENCIES
US Copyright Office
US Patent and Trademark Office (USPTO)

SCHOLARLY AND ACADEMIC
Glossary of terms
Economics
An Economic Review of the Patent System by Fritz Machlup, 1968
The Economic Theory Concerning Patents for Inventions by Arnold Plant, 1934
Hoover IP2 2014 Summer Teaching Institute reading list
Hoover IP2 2015 Summer Teaching Institute reading list
Hoover IP2 published articles
Principles of Patent Law, sixth edition, by F. Scott Kieff, Pauline Newman, Herbert F. Schwartz, Henry E. Smith
Commercializing Innovation web site

Director
Peter and Helen Bing Senior Fellow
Steering Committee
Peter and Kirsten Bedford Senior Fellow
Research Fellow
Morris Arnold and Nona Jean Cox Senior Fellow
External Advisory Board

Have Information Rules Changed? Revisiting the Network Economy

Wednesday, May 29, 2019
Lou Henry Hoover Building, Stanford University

The Market For Regulation In The Internet Of Things

Event

Institutions and Regulation for the Fourth Industrial Revolution

Friday, May 3, 2019
Brussels, Belgium

Hoover IP² partnered with Liege Competition and Innovation Center and Center for Intellectual Property

Event

Hoover symposium revisits the principles of the network economy

Thursday, April 25, 2019

In 1999, Carl Shapiro and Hal Varian published Information Rules: A Strategic Guide to the Network Economy. In their book, they acknowledged that the global economy was changing dramatically and posited that relatively minor forces in the industrial economy would play a critical role in the network economy. These changes invited their careful reassessment of existing legal, policy, and regulatory institutions, anchored by serious formal theoretical economic reasoning and empirical analysis.

News

Hoover IP² to convene conference on Fourth Industrial Revolution in Brussels

Tuesday, March 26, 2019

The Fourth Industrial Revolution—the fusion of digital technologies, characterized by big data, artificial intelligence, robotics, smartphones, and autonomous vehicles—will affect how people work, communicate, and travel. Hoover IP² has organized a conference, “Institutions and Regulation for the Fourth Industrial Revolution,” that addresses a core public policy question: What institutions, policies, rules, and regulations will maximize individual benefits and economic surplus as the Fourth Industrial Revolution takes root?

News

The Market for Regulation in the Internet of Things

Thursday, January 10, 2019 to Friday, January 11, 2019
Lou Henry Hoover Building, Stanford University

The Market for Regulation in the Internet of Things

Event

Young Policymakers Hone Analytical Skills

Thursday, October 11, 2018

The 2018 cohort of the Hoover IP² Summer Institute on the Economics and Politics of Innovation overwhelming endorsed the program that ran from August 5 to August 18, 2018, at Stanford University. In a survey of participants administered at the program’s conclusion, all respondents stated that they were satisfied with the institute and they would recommend it to other students and young professionals. In the words of one participant, “the Summer Institute was one of the best experiences I’ve had in my professional and student life.”

News
Hoover IP2 Logo

Hoover IP² Summer Institute on the Economics and Politics of Innovation

Sunday, August 5, 2018 to Friday, August 17, 2018
Hoover Institution, Stanford University

The Hoover IP² Summer Institute on The Economics and Politics of Innovation is designed to educate students and young professionals on how to think systematically about regulatory systems and their consequences. Its goal is to equip attendees with analytic tools that are basic to good policymaking. The Summer Institute follows the model of executive education programs organized by business schools. It is an intensive, two‐week long program in which participants are taught by instructors who are experts in the particular subject matter being studied on that particular day. 

Event

The Market for Regulation in the Internet of Things

Tuesday, July 17, 2018

As the 4th Industrial Revolution progresses, the Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity (Hoover IP²) is looking towards a new horizon of patent policy that is tied to a crucial component of this technological revolution: the Internet of Things (IoT). The IoT will be the focus of Hoover IP²’s upcoming conference, the “Market for Regulation in the Internet of Things,” to take place January 10–11, 2019.

News

What Patents Really Do: Historical Perspectives on Current Debates

Thursday, May 17, 2018 to Friday, May 18, 2018
Stanford, CA

What Patents Really Do: Historical Perspectives on Current Debates

May 17-18, 2018

Event

Hoover IP² Undertakes Book Project on Patent History

Friday, April 27, 2018

Historian Margaret MacMillan observed that “we can learn from history, but we can also deceive ourselves when we selectively take evidence from the past to justify what we have already made up our minds to do.” Government regulators who use the lessons of history in to solve today’s public policy problems may, in fact, fall into such a trap. The Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity (Hoover IP²) aims to help ameliorate this problem with its latest project: a book that examines the economic and legal history of patents and patent systems

News

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Does the US patent system as currently constituted hold up or push forward the commercialization of technological innovations?

Does the US patent system frustrate or facilitate the inventive activities and entrepreneurial processes central to economic growth?

PROJECT SUMMARY

The US patent system is a solution to a delicate balancing act where the complete absence of intellectual property rights or the overly broad specification of those rights can thwart innovation.

Inventors require the means to earn a return on the years spent perfecting an invention. Conversely, patents extending in perpetuity that require licensing and royalty payments would dissuade legitimate use and encourage excessive imitation. Further, a patent system providing property rights to the original patent holder for all future inventions that built on the original idea is non-optimal.

Such an unbalanced system would discourage innovation.

The US patent system addresses the need for balance by:

  • Providing a fixed-term property right for a specific and novel invention

  • Requiring, in turn, that the design features of the invention be widely disseminated so that they enter the public domain once the term of the patent expires

  • Permitting a patentee to exchange or license the patented invention

The Hoover Institution Working Group on Intellectual Property, Innovation, and Prosperity (Hoover IP²) is reviewing the premises of the US patent system and addressing questions of scope, specification, duration, and economic impact of that system.

Hoover IP²'s goals are to:

  • Build a dense network of scholars, from a variety of academic disciplines, who are engaged in research on the US patent system

  • Analyze the implications that may be drawn from those research results

  • Publish the resulting scholarship in peer-reviewed venues

  • Disseminate that scholarship to the larger public

RESEARCH PHILOSOPHY

Underlying the US patent system is a fundamental principle of economics first articulated by Adam Smith more than two centuries ago and empirically demonstrated countless times since:

  • Property rights, appropriately defined, give individuals and firms incentives to trade

  • Trade provides incentives to specialize

  • Specialization is essential for technological innovation

Academic research on the patent system tends to be insular and is specific to certain fields, most particularly law. Support from the Hoover IP² project aims both to broaden the number of researchers in the patent literature and to improve the quality of the causal inferences they draw.

CONFERENCE OVERVIEW

The guiding principles of the Working Group are two-fold:

  1. Hypotheses can only be “ruled out” or “ruled in” on the basis of reason and evidence.

  2. Understanding the functioning of complex systems—such as the property rights system that structures the process of technological innovation—requires that the appropriate bodies of evidence and the analytic tools to assess them be drawn from multiple disciplines.

Of the broad range of vehicles by which scholars can disseminate their research, conferences are among the most efficient. At conferences, researchers are able to share their ideas, present their findings, and engage in scholarly debate with of their colleagues.

At Hoover IP² conferences, which draw participants from a variety of fields, invited researchers have the opportunity to present their findings to those with different theoretical perspectives and academic training and, thus, to test if their results are robust to alternative ways of looking at evidence.

By including scholars from a wide variety of disciplines (for example, business, economics, engineering, history, law, medicine and the life sciences, and political science), the Hoover IP² conferences will expand the number of researchers in the patent literature beyond the legal academy and encourage interdisciplinary scholarly research.

CONFERENCE ORGANIZATION

  • Researchers are invited, by the Hoover IP2 Steering Committee, to present their work on the basis of its academic quality, independent of any policy or normative implications.

  • The number of papers presented at any conference is limited, thus allowing ample time for their full presentation and for interactive discussion.

  • For each paper, there are two formal discussants—typically, one from academia and the second from the private sector or from the legal or policy making community.