Class 13. AAE540/MHR540. IP Rights, Innovation and. Technology. Spring 2013.
1. 3/5/2013. Class 13. • Last class. – Cumulative innovations (Chapter 5).
AAE540/MHR540
IP Rights, Innovation and Technology Fall 2016
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• Last class – Cumulative innovations (Chapter 5) • Quality ladder • Prospecting
• Today and next class – Review of homework 1-2 – Open-source • IP in software and biotechnology
– Licensing (Ch. 6) – Midterm on Oct. 20 – Homework 3 out Oct. 20th, due Nov. 1st 10/14/2016
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Another way of organizing follow-on innovation: “open source” (OS) • http://www.opensource.org/docs/definition.php
• • • •
Right to see source code; Right to copy; Right to modify & use; “free software” – General public license (GPL) – “copyleft” • Using IPRs to regulate technologies and keep them public
• “open software” – Berkeley UNIX license (BSD, “copycenter”) – Lesser GPL
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Incentives for OS • • • • • •
Own-use by corporations and hobbyists Signaling Education Selling Complements Strategic Goals Social Psychology
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Own-use by corporations and hobbyists • Decentralization – Attract individuals with unusual utility and cost – Elicit private information
• • • •
Aggregate demand Bias toward developer products No agency problem (moral hazard risks) No deadweight loss (undersupply)
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• Signaling – Benefits for Individuals: jobs, stock, venture capital offers – Benefits for companies: signaling quality
• Education – Similar to signaling – Does OS peer review facilitate education?
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Selling complements: value capture strategies • For monopolists (complete appropriability) – Low-cost complements boost revenue – Include hardware, applications, marketing, customization services, education & tech support
• For Non-Monopolists (limited appropriability) – Embedded LINUX: Partial appropriability, more spillovers than normal patent incentives – Open parts, patented products – Shared development: bug fixes, updates – Development of user base – Demonstrate technical prowess 10/14/2016
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• Strategic Goals – Standard setting – influencing OS evolution – Market penetration: alumni effect, reassuring consumers; hold-up; switching costs
• Social Psychology – Obligation, community identification, reputation, ideology, altruism… – But fragile and weak… 10/14/2016
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Simple economics of open source (Lerner and Tirole, 2000) • Case studies • Labor economics framework – Signaling incentives – Alumni effects (lower programming cost) – Customization and debugging benefits
• Commercial firms (selling complements, strategic goals…) • Challenges – “Forking” projects – Geared towards sophisticated users 10/14/2016
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Synthetic biology and IPRs (Rai and Boyle, 2007) • Open source applied to biotechnology? – Biobricks; Parts registry – Share by all – Learning by doing • Patented tools available on condition that improvements made similarly available • Applications can be privatized
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High Tech Entrepreneurs and the Patent System (Graham, Merges, Samuelson and Sichelman, 2009) • National survey of high tech startups – D&B population sample (10500 founded after 1998) – Venture capital sample (5600 founded after 1998) – Biotechnology, medical device, software • Returned survey: total 1332 • No evidence of response bias
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