Would global patent protection be too weak without international coordination?

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

11 Scopus Citations
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Original languageEnglish
Pages (from-to)42-54
Journal / PublicationJournal of International Economics
Volume89
Issue number1
Publication statusPublished - Jan 2013

Abstract

In the standard model with free trade and social-welfare-maximizing governments à la Grossman and Lai (2004), cross-border positive policy externalities result in countries choosing a combination of patent strengths that is weaker than optimal from a global perspective. This paper introduces three new features to the analysis: trade and FDI barriers, firm heterogeneity and political economy considerations in setting patent policies. Based on calibration, we find that there would be global under-protection of patent rights when there is no international policy coordination. The empirical fact that firm revenues follow a fat-tailed distribution implies that the barriers to exploit inventions internationally are quite low, despite the fact that only a small fraction of firms sell overseas and an even smaller fraction of firms carry out FDI as a result of trade barriers. Furthermore, requiring all countries to harmonize their patent standards with the equilibrium standard of the most innovative country (the US) does not lead to global over-protection of patent rights. © 2012 Elsevier B.V.

Research Area(s)

  • Harmonization, Intellectual property rights, Patents, TRIPS