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Contracting over the Disclosure of

Scientific Knowledge:
IP Protection and Academic Publication
Joshua Gans, Fiona Murray & Scott Stern
26th February, 2010

Thursday, 25 February 2010


Process of Growth

Thursday, 25 February 2010


Process of Growth

t
A

Increase in
Knowledge

Thursday, 25 February 2010


Process of Growth
xt

New Goods
at t

t
A

Increase in
Knowledge

Thursday, 25 February 2010


Process of Growth
xt
 Increased
New Goods Productivity
at t

t
A

Increase in
Knowledge

Thursday, 25 February 2010


Process of Growth
xt
 Increased
New Goods Productivity
at t

t
A

Increase in
Knowledge

δ H A (At + A t )
  
R&D Productivity

Thursday, 25 February 2010


Process of Growth
xt
 Increased
New Goods Productivity
at t

t
A

Increase in
Knowledge

δ H A (At + A t )  t +1
A
   
Future Knowledge
R&D Productivity

Thursday, 25 February 2010


Process of Growth
xt
 Increased
New Goods Productivity
at t

t
A
 Appropriated
Increase in
Knowledge

δ H A (At + A t )  t +1
A
   
Future Knowledge
R&D Productivity

Thursday, 25 February 2010


Process of Growth
xt
 Increased
New Goods Productivity
at t

t
A
 Appropriated
Increase in
Knowledge

δ H A (At + A t )  t +1
A
   
Future Knowledge
R&D Productivity

Spillover

Thursday, 25 February 2010


The Accumulation of Knowledge

Thursday, 25 February 2010


The Accumulation of Knowledge
 Dual knowledge: an idea is both a new product and an input into
the production of future knowledge (Romer, Aghion & Howitt)

Thursday, 25 February 2010


The Accumulation of Knowledge
 Dual knowledge: an idea is both a new product and an input into
the production of future knowledge (Romer, Aghion & Howitt)
 Persistent economic growth relies on inter-temporal knowledge
spillovers through cumulative innovation (Jones)

Thursday, 25 February 2010


The Accumulation of Knowledge
 Dual knowledge: an idea is both a new product and an input into
the production of future knowledge (Romer, Aghion & Howitt)
 Persistent economic growth relies on inter-temporal knowledge
spillovers through cumulative innovation (Jones)
 The mere production of knowledge does not guarantee that others
will be able to exploit that knowledge (Polanyi; Mokyr): tacit
knowledge and trade secrecy

Thursday, 25 February 2010


The Accumulation of Knowledge
 Dual knowledge: an idea is both a new product and an input into
the production of future knowledge (Romer, Aghion & Howitt)
 Persistent economic growth relies on inter-temporal knowledge
spillovers through cumulative innovation (Jones)
 The mere production of knowledge does not guarantee that others
will be able to exploit that knowledge (Polanyi; Mokyr): tacit
knowledge and trade secrecy
 Open question: what are the economic forces driving knowledge
disclosure – a missing micro-foundation for endogenous growth
theory.

Thursday, 25 February 2010


The Duality of Knowledge
Adapted from Stokes (1997)
Immediate usefulness

Low High

Low

Scientific
Merit

High

Thursday, 25 February 2010


Disclosure Paths

Thursday, 25 February 2010


Disclosure Paths
 Intellectual property system
 Romer emphasized the fact that when you obtain a patent, the
disclosures in the application can be used for future research
 but … may prefer secrecy to obtaining a patent (Mansfield,
Anton & Yao, Denicolo & Franzoni, Kultti, Takalo & Toikka,
Erkal)

Thursday, 25 February 2010


Disclosure Paths
 Intellectual property system
 Romer emphasized the fact that when you obtain a patent, the
disclosures in the application can be used for future research
 but … may prefer secrecy to obtaining a patent (Mansfield,
Anton & Yao, Denicolo & Franzoni, Kultti, Takalo & Toikka,
Erkal)

 Open science and publication


 Norms (Merton) and incentives (Dasgupta & David)
 Intrinsic preferences (Stern; Aghion, Dewatripont & Stein)

Thursday, 25 February 2010


Disclosure Paths
 Intellectual property system
 Romer emphasized the fact that when you obtain a patent, the
disclosures in the application can be used for future research
 but … may prefer secrecy to obtaining a patent (Mansfield,
Anton & Yao, Denicolo & Franzoni, Kultti, Takalo & Toikka,
Erkal)

 Open science and publication


 Norms (Merton) and incentives (Dasgupta & David)
 Intrinsic preferences (Stern; Aghion, Dewatripont & Stein)

 Both paths involve choices and form part of a disclosure


strategy

Thursday, 25 February 2010


How often are scientific research publications
part of patent-paper pairs?
# paired
% paired
# papers with
publications
patents

Publications by public sector funded


researchers 235 106 45%

Publications by public and private


sector funded researchers 70 41 59%

Publications by private sector funded


researchers 36 24 67%

Starting with publications: From a sample of 341 research publications (all the research
articles from the leading life science journal Nature Biotechnology between 1997 and 1999).
Examine which publications are also disclosed in patents. (Murray and Stern 2007)

Thursday, 25 February 2010


How often are patents part of a
patent-paper pairs?
# paired
with % paired
# patents
publication patents
s

Patents by public sector funded


researchers 1308 1099 84%

Patents by public and private


sector funded researchers 187 164 88%

Patents by private sector funded


researchers 2775 1347 49%

Starting with patents: From the full population of human gene patents (US patents identified using
bioinformatics methods that disclose and claim a human gene sequence or fragment; Jensen and
Murray 2005), which patents are also disclosed in publications? (Huang and Murray 2008).

Thursday, 25 February 2010


This paper …

Thursday, 25 February 2010


This paper …
 Research contribution: endogenise the choice of disclosure
strategy as negotiated between scientists and their funders

Thursday, 25 February 2010


This paper …
 Research contribution: endogenise the choice of disclosure
strategy as negotiated between scientists and their funders

 Key output is to understand interaction between patenting and


publication
 Complementarity is assumed and necessary in endogenous growth
 Concerns about substitutability: that patenting could crowd out
publication (Heller & Eisenberg)

Thursday, 25 February 2010


This paper …
 Research contribution: endogenise the choice of disclosure
strategy as negotiated between scientists and their funders

 Key output is to understand interaction between patenting and


publication
 Complementarity is assumed and necessary in endogenous growth
 Concerns about substitutability: that patenting could crowd out
publication (Heller & Eisenberg)

 Empirical backdrop
 High and increasing incidence of patent-paper pairs (Murray)
 Evidence that patents may reduce inter-temporal spillovers (Murray
& Stern, Williams)

Thursday, 25 February 2010


… results

Thursday, 25 February 2010


… results
 Baseline conclusion: several fundamental drivers of
complementarity between patents and publication
 Congruence (overlap in patent/publication disclosures)
 Competitive protection (effective patents block entry providing
insurance against entry-promoting disclosures)
 Non-economic payments (patents improve commercial outcomes
and publications are used to reward scientists)

Thursday, 25 February 2010


… results
 Baseline conclusion: several fundamental drivers of
complementarity between patents and publication
 Congruence (overlap in patent/publication disclosures)
 Competitive protection (effective patents block entry providing
insurance against entry-promoting disclosures)
 Non-economic payments (patents improve commercial outcomes
and publications are used to reward scientists)

 Dynamic extension: patents may reduce publication incentives

Thursday, 25 February 2010


… results
 Baseline conclusion: several fundamental drivers of
complementarity between patents and publication
 Congruence (overlap in patent/publication disclosures)
 Competitive protection (effective patents block entry providing
insurance against entry-promoting disclosures)
 Non-economic payments (patents improve commercial outcomes
and publications are used to reward scientists)

 Dynamic extension: patents may reduce publication incentives


 Design of IP protection
 Stronger IP can increase scientific openness
 But simple disclosure rules and rights have unintended
consequences

Thursday, 25 February 2010


Key Model Elements

Thursday, 25 February 2010


Key Model Elements
 Role of disclosure
 Potentially fosters imitative entry (reducing commercial returns) – can happen
through patent and/or publication disclosures
 Generates scientific kudos (through publication only) although scientists also care
about income
 Patent and publication disclosures might overlap

Thursday, 25 February 2010


Key Model Elements
 Role of disclosure
 Potentially fosters imitative entry (reducing commercial returns) – can happen
through patent and/or publication disclosures
 Generates scientific kudos (through publication only) although scientists also care
about income
 Patent and publication disclosures might overlap

 Disclosure strategy
 Outcome of negotiation between (academic) scientist and firm over payments, IP
strategy and publication rights
 Scientist assumed to be wealth constrained

Thursday, 25 February 2010


Key Model Elements
 Role of disclosure
 Potentially fosters imitative entry (reducing commercial returns) – can happen
through patent and/or publication disclosures
 Generates scientific kudos (through publication only) although scientists also care
about income
 Patent and publication disclosures might overlap

 Disclosure strategy
 Outcome of negotiation between (academic) scientist and firm over payments, IP
strategy and publication rights
 Scientist assumed to be wealth constrained

 Simplifying assumptions
 Single scientist and single firm (bilateral monopoly)
 Single project (more about funding an academic scientist than scientist-employee)
 No outside options (relaxed in the paper)

Thursday, 25 February 2010


Choice of disclosure regimes
Publication disclosure (d)
0 D
Commercial Patent-Paper
1
Science Pairs
Patent
(i)
0 Secrecy Open Science

Thursday, 25 February 2010


Preferences
 Scientist

 Firm/Private Funder: expected profit


 Expected profit of the private funder:

Π
 − k − w − Pr(successful entry)(Π − π )
Monopoly capital Competitive
Profit cost Profit

While researchers care about scientific disclosure, investors care


about the impact of disclosures on potential competition

Thursday, 25 February 2010


Impact of Patents

13

Thursday, 25 February 2010


Impact of Patents
 Creates cost of workaround
 Additional entry cost: λ

13

Thursday, 25 February 2010


Impact of Patents
 Creates cost of workaround
 Additional entry cost: λ

 Blocked entry
 Probability entry is prohibited entirely: ρ

13

Thursday, 25 February 2010


Impact of Patents
 Creates cost of workaround
 Additional entry cost: λ

 Blocked entry
 Probability entry is prohibited entirely: ρ

 Disclosures
 Minimum disclosure requirements in the patent: dPAT
 Literally, the probability disclosures yield knowledge that
reduces entry costs by bE

13

Thursday, 25 February 2010


Impact of Patents
 Creates cost of workaround
 Additional entry cost: λ

 Blocked entry
 Probability entry is prohibited entirely: ρ

 Disclosures
 Minimum disclosure requirements in the patent: dPAT
 Literally, the probability disclosures yield knowledge that
reduces entry costs by bE

 Congruence
 Probability patent and publication disclosures overlap: α

13

Thursday, 25 February 2010


Probability of Entry
1

14

Thursday, 25 February 2010


Probability of Entry
1

14

Thursday, 25 February 2010


Probability of Entry
1

π
(1 − i ρ )π

14

Thursday, 25 February 2010


Probability of Entry
1

π
(1 − i ρ )π

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1

π
(1 − i ρ )π

(1 − i ρ )π − iλ + bE Pr(Disclosure)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1 Pr (Disclosure)

π
(1 − i ρ )π

(1 − i ρ )π − iλ + bE Pr(Disclosure)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1 Pr (Disclosure)
= (1 − α ) ( i Pr (Learn from Patent)+Pr(Learn from Pub))
π + α i Pr(Learn from Either)

(1 − i ρ )π

(1 − i ρ )π − iλ + bE Pr(Disclosure)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1 Pr (Disclosure)
= (1 − α ) ( i Pr (Learn from Patent)+Pr(Learn from Pub))
π + α i Pr(Learn from Either)
= (1 − α ) ( idPAT + d ) + α ( idPAT + d − idPAT d )
(1 − i ρ )π

(1 − i ρ )π − iλ + bE Pr(Disclosure)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1 Pr (Disclosure)
= (1 − α ) ( i Pr (Learn from Patent)+Pr(Learn from Pub))
π + α i Pr(Learn from Either)
= (1 − α ) ( idPAT + d ) + α ( idPAT + d − idPAT d )
(1 − i ρ )π = idPAT + d − α idPAT d

(1 − i ρ )π − iλ + bE Pr(Disclosure)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1

π
(1 − i ρ )π

(1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)

(1 − i ρ )π − iλ

14

Thursday, 25 February 2010


Probability of Entry
1 1

(1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)

0 0

14

Thursday, 25 February 2010


Probability of Entry
1 1

Random
Fixed
(1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d) Cost, θ

0 0

14

Thursday, 25 February 2010


Probability of Entry
1 1

Random
Fixed
(1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d) Cost, θ

0 0

14

Thursday, 25 February 2010


Probability of Entry
1 1

Random
Fixed
(1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d) Cost, θ

= Pr (entry)

0 0

14

Thursday, 25 February 2010


Expected Profits
Π
 − k − w − Pr(successful entry)(Π − π )
Monopoly capital Competitive
Profit cost Profit

15

Thursday, 25 February 2010


Expected Profits
Π
 − k − w − Pr(successful entry)(Π − π )
Monopoly capital Competitive
Profit cost Profit

Pr (successful entry)
= (1 − i ρ )Pr(entry)
= (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d))

15

Thursday, 25 February 2010


Expected Profits
Π
 − k − w − Pr(successful entry)(Π − π )
Monopoly capital Competitive
Profit cost Profit

Pr (successful entry)
= (1 − i ρ )Pr(entry)
= (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d))

The potential for entry is increasing in both patenting and publication


disclosure, while the cost of entry may or may not rise if there is a patent.

15

Thursday, 25 February 2010


Easy Case: Complete Overlap

Thursday, 25 February 2010


Easy Case: Complete Overlap
 Suppose that the knowledge disclosed in a patent and
publication were exactly the same.

Thursday, 25 February 2010


Easy Case: Complete Overlap
 Suppose that the knowledge disclosed in a patent and
publication were exactly the same.
 Then if decide to patent, there is no additional cost in
publishing and vice versa.

Thursday, 25 February 2010


Easy Case: Complete Overlap
 Suppose that the knowledge disclosed in a patent and
publication were exactly the same.
 Then if decide to patent, there is no additional cost in
publishing and vice versa.
 Would only observe secrecy and patent-paper pairs.

Thursday, 25 February 2010


Negotiations
 Use the Nash bargaining solution

 Negotiate over w, i and d ∈ [0, D]


 Patent (i) and publication (d) used to increase surplus
 Wages (w) used to distribute surplus

 Technical issue: wages cannot be negative


 When w > 0, choose i and d to maximise total surplus
 But if w = 0, total surplus not maximised
 As increase d, reduce w: if bS relatively high may want zero wages
 This occurs if
Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE idPAT ) (Π − π )
D>d=
bS + bE (1 − i ρ )(1 − α idPAT )(Π − π )

17

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Disclosure Choice: set d = D if

18

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Disclosure Choice: set d = D if

bS ≥ (1 − i ρ )bE (1 − α idPAT )(Π − π )

18

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Disclosure Choice: set d = D if

bS ≥ (1 − i ρ )bE (1 − α idPAT )(Π − π )


bS
Δd ≡ ≥ (1 − i ρ )(1 − α idPAT )
bE (Π − π )

18

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Disclosure Choice: set d = D if

bS ≥ (1 − i ρ )bE (1 − α idPAT )(Π − π )


bS
Δd ≡ ≥ (1 − i ρ )(1 − α idPAT )
bE (Π − π )

18

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Disclosure Choice: set d = D if

bS ≥ (1 − i ρ )bE (1 − α idPAT )(Π − π )


bS
Δd ≡ ≥ (1 − i ρ )(1 − α idPAT )
bE (Π − π )

More likely to be satisfied if there is a patent.


18

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Patent Choice: set i = 1 if

19

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Patent Choice: set i = 1 if

Π − k − (1 − ρ ) ( (1 − ρ )π − λ + bE (dPAT + d − α dPAT d)) (Π − π )


Δi ≡ ≥1
Π − k − (π + bE d ) (Π − π )

19

Thursday, 25 February 2010


Total Surplus Maximisation
 Assume that D < d
 Choose i and d to maximise:

bS d + Π − k − (1 − i ρ ) ( (1 − i ρ )π − iλ + bE (idPAT + d − α idPAT d)) (Π − π )


 Patent Choice: set i = 1 if

Π − k − (1 − ρ ) ( (1 − ρ )π − λ + bE (dPAT + d − α dPAT d)) (Π − π )


Δi ≡ ≥1
Π − k − (π + bE d ) (Π − π )

More likely to be satisfied if there is a publication.


19

Thursday, 25 February 2010


Complementarity

Commercial Patent-Paper
Science Pairs

Open
Secrecy
Science

1 Δd

Thursday, 25 February 2010


Sources of Complementarity

Thursday, 25 February 2010


Sources of Complementarity
 Congruence (α): as α increases, this increases patent-paper pairs
relative to other regimes.
 Intuition: the marginal cost of disclosure is lower if there is a patent
as less entry-facilitating knowledge is likely to be generated.

Thursday, 25 February 2010


Sources of Complementarity
 Congruence (α): as α increases, this increases patent-paper pairs
relative to other regimes.
 Intuition: the marginal cost of disclosure is lower if there is a patent
as less entry-facilitating knowledge is likely to be generated.

 Patent effectiveness (ρ): as the effectiveness of a patent in


blocking entry rises, this increases patent-paper pairs relative to
other regimes.
 Intuition: if a patent can actually block entry (ρ = 1), the disclosures
are not commercially harmful.

Thursday, 25 February 2010


Sources of Complementarity
 Congruence (α): as α increases, this increases patent-paper pairs
relative to other regimes.
 Intuition: the marginal cost of disclosure is lower if there is a patent
as less entry-facilitating knowledge is likely to be generated.

 Patent effectiveness (ρ): as the effectiveness of a patent in


blocking entry rises, this increases patent-paper pairs relative to
other regimes.
 Intuition: if a patent can actually block entry (ρ = 1), the disclosures
are not commercially harmful.

 Patent breadth (λ): as patent breadth increases, this increases


patent-paper pairs relative to other regimes.
 Intuition: patents more effective at reducing entry so more likely to
be chosen reducing the marginal cost of publication disclosure.

Thursday, 25 February 2010


Independent Choices
 Suppose d and dPAT revealed
information about distinct Δi
knowledge (α = 0)
 Suppose patent protection Commercial Patent-Paper
ineffective in blocking entry Science Pairs
(ρ = 0)
1
 When Δd > 1, surplus
maximisation would involve
d=D Secrecy Open
Science
 Wages always zero (the
outside option) when there is
publication 1 Δd
 Decisions do not interact.

Thursday, 25 February 2010


Possibility of Zero Wages
 D>d
 If publishing maximises joint surplus, w = 0
 Increase d until wage is constrained
 Beyond this point, d used as compensation.

d =
* ( )
Π − k − (1 − iρ ) (1 − iρ )π − iλ + bE id PAT (Π − π )
i
2(1 − iρ )bE (1 − α id PAT )(Π − π )
 Increasing λ and ρ
 More likely to take out a patent
 If there is publication, negotiate more disclosure

 Increasing dPAT
 Less likely to take out a patent
 If there is a publication, reduces disclosure

Stronger IP protection (higher λ and ρ) stimulates open science. Higher dPAT


may not increase disclosure if it causes strategy to move to secrecy.

Thursday, 25 February 2010


Generating Substitutability

Thursday, 25 February 2010


Generating Substitutability
 Static model yields several clear drivers of complementarity
between patents and publications
 Theory of patent-paper pairs
 Micro-foundation for endogenous growth assumption

Thursday, 25 February 2010


Generating Substitutability
 Static model yields several clear drivers of complementarity
between patents and publications
 Theory of patent-paper pairs
 Micro-foundation for endogenous growth assumption

 Conflicting empirical evidence


 Murray and Stern: citations fall following patent grant
 Williams: fewer follow-on commercialised products when
scientific knowledge subject to IP protection

Thursday, 25 February 2010


Generating Substitutability
 Static model yields several clear drivers of complementarity
between patents and publications
 Theory of patent-paper pairs
 Micro-foundation for endogenous growth assumption

 Conflicting empirical evidence


 Murray and Stern: citations fall following patent grant
 Williams: fewer follow-on commercialised products when
scientific knowledge subject to IP protection

 Empirical research identifies impact on follow-on research


direction and acknowledgment (source of kudos)

Thursday, 25 February 2010


Dynamic Extension

Thursday, 25 February 2010


Dynamic Extension
 Suppose that scientists and firms live two periods
 Overlap with other generations
 Future kudos generated by citation as well as publication
 Assume away sources of complementarity (α = ρ = 0) but otherwise same
model

Thursday, 25 February 2010


Dynamic Extension
 Suppose that scientists and firms live two periods
 Overlap with other generations
 Future kudos generated by citation as well as publication
 Assume away sources of complementarity (α = ρ = 0) but otherwise same
model
 Past knowledge reduces future capital costs, k
 Full transfer (under contracting): zero future costs
 Partial transfer (through publication): (1-dt-1)k

Thursday, 25 February 2010


Dynamic Extension
 Suppose that scientists and firms live two periods
 Overlap with other generations
 Future kudos generated by citation as well as publication
 Assume away sources of complementarity (α = ρ = 0) but otherwise same
model
 Past knowledge reduces future capital costs, k
 Full transfer (under contracting): zero future costs
 Partial transfer (through publication): (1-dt-1)k

 Firm owns patent and can license it to next generation


 Disclosure, fee & wages now a 3-way negotiation
 Use Nash bargaining solution
 Past publication gives future pair an easier work-around if there is no
license – work-around possible (on same research path) with probability γ.
 However, if work-around then do not cite previous work.

Thursday, 25 February 2010


License Negotiations

Thursday, 25 February 2010


License Negotiations
 Outcomes
 If no patent, τ = 0
 If patent but no publication, τ = k/3
 If patent and past publication, τ = k(1-(1-γ)dt-1)/3

Thursday, 25 February 2010


License Negotiations
 Outcomes
 If no patent, τ = 0
 If patent but no publication, τ = k/3
 If patent and past publication, τ = k(1-(1-γ)dt-1)/3

 Patent-Paper Pairs
 For δ sufficiently high, patent-paper pairs can be an
equilibrium
 Presence of patent reduces incentives for publication and
vice versa when γ < 1

Thursday, 25 February 2010


Substitutability
Commercial Patent-Paper
Science Pairs

Open
Secrecy Science

1 Δd

Thursday, 25 February 2010


Other implications
 Look only at symmetric dynamic equilibria
 Inter-temporal complementarity
 Only worthwhile publishing if expect future scientific work to
be published (so can earn a citation)
 Therefore, there can exist multiple equilibria with commercial
science or secrecy always an equilibrium under certain
conditions.

 Domain of open science is expanded as a result of


substitutability

Thursday, 25 February 2010


IP ownership

Thursday, 25 February 2010


IP ownership
 Dynamic model assumes that the firm owns the IP rights and
negotiates over the license fee.

Thursday, 25 February 2010


IP ownership
 Dynamic model assumes that the firm owns the IP rights and
negotiates over the license fee.
 What if the scientist owned those rights?
 It would then care about future publication in order to generate
a citation.

Thursday, 25 February 2010


IP ownership
 Dynamic model assumes that the firm owns the IP rights and
negotiates over the license fee.
 What if the scientist owned those rights?
 It would then care about future publication in order to generate
a citation.

 Consequences:
 A reduced future license fee when there is a publication
 In negotiations, the scientist and firm are less likely to publish
as this will reduce license revenues even further
 Openness may be facilitated by leaving IP rights in the firm’s
hands.

Thursday, 25 February 2010


Key Extensions

Thursday, 25 February 2010


Key Extensions

 Public funding: impact and restrictions

Thursday, 25 February 2010


Key Extensions

 Public funding: impact and restrictions


 Scientific and Commercial Research Racing

Thursday, 25 February 2010


Key Extensions

 Public funding: impact and restrictions


 Scientific and Commercial Research Racing
 Empirical: Human Genome Project

Thursday, 25 February 2010


Conclusions
 The disclosure strategy of privately funded research is grounded in
the disclosure environment and is shaped by the bargaining over
disclosure between scientists and their funders
 Rather than an anomaly, patent-paper pairs emerge as an equilibrium
outcome in which scientific researchers trade off wages in order to
gain scientific credit, while investors (private or public) seek to retain
the ability to capture value from these “dual-purpose” discoveries
 Interestingly, in most circumstances, increases in the strength of
formal intellectual property protection enhances the scope for patent-
paper pairs.
 More generally, the model suggests that the key requirements for
cumulative disclosure in the aggregate requires a careful evaluation
of the strategic foundations of disclosure strategy.

Thursday, 25 February 2010

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