The Use and Value of IP Rights

Accompanying the growth of the knowledge sector in many economies is an increased interest in property rights for the knowledge being created by firms and individuals, that is, in the protection of those rights via Intellectual Property Rights (IPR). IPRs include patents, trademarks, copyrights, trade secrets, and a number of more specialized instruments such as plant patents. Because these rights are a creation of legislation and government regulation, the increased focus on their use also leads to increased interest in their design and function on the part of policymakers. The present paper is designed to review the various ways these rights are used today, to draw some lessons for policy, and to suggest areas where further research is needed. The paper focuses on patents, arguably the most important form of intellectual property for business firms, although other rights will be discussed to the extent that they substitute for patents in various contexts. When the governing authority grants a patent, it trades off short term exclusive (monopoly) rights to the use of an invention in return for two things: 1) an incentive to create the invention and 2) early publication of a description of the invention rather than the use of secrecy to protect its misappropriation. But with the increasing importance to enterprises of their investments in knowledge and the accompanying increase in the use of the patent system, it has become apparent that things are far more complex than the bargain suggested by the simple tradeoff. In addition, as the importance of the IP system grows, clever strategists use it in ways not contemplated by its designers. Hence the timeliness of this review of the use and value of IP rights, especially patents. The first observation on ways in which reality departs from the simple one invention, one patent picture is that invention is cumulative, with each discovery today building on discoveries in the past. Therefore the incentive created for one invention or innovation via the patent right can act to slow down the creation or