Would Global Patent Protection Be Too Weak Without International Coordination?

47 Pages Posted: 25 Jul 2011

See all articles by Edwin L.-C. Lai

Edwin L.-C. Lai

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Isabel Kitming Yan

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Date Written: July 18, 2011

Abstract

This paper analyzes the setting of national patent policies in the global economy. In the standard model with free trade and social-welfare-maximizing governments à la Grossman and Lai (2004), cross-border positive policy externalities induce individual countries to select patent strengths that are weaker than is optimal from a global perspective. The paper introduces three new features to the analysis: trade barriers, firm heterogeneity in terms of productivity and political economy considerations in setting patent policies. The first two features (trade barriers interacting with firm heterogeneity) tend to reduce the size of cross-border externalities in patent protection and therefore make national IPR policies closer to the global optimum. With firm lobbying creating profit-bias of the government, it is even possible that the equilibrium strength of global patent protection is greater than the globally efficient level. Thus, the question of under-protection or not is an empirical one. Based on calibration exercises, we find that there would be global under-protection of patent rights when there is no international policy coordination. 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.

Keywords: intellectual property rights, patents, TRIPS, harmonization

JEL Classification: O340, F130

Suggested Citation

Lai, Edwin L.-C. and Yan, Isabel Kitming, Would Global Patent Protection Be Too Weak Without International Coordination? (July 18, 2011). CESifo Working Paper Series No. 3509. Available at SSRN: https://ssrn.com/abstract=1888164

Edwin L.-C. Lai (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

Isabel Kitming Yan

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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