SOFTPAT · ON THE COSTS OF KNOWLEDGE PRIVATIZATION

Patent systems are supposed to spur incentives to innovate 1) by granting inventors temporary monopoly rights that allow them to recoup their research and development (R&D) investment and 2) by facilitating follow-up inventions by making information about technical inventions available to the public. In other words, patents make technical information available to society at the cost of “privatization” of this knowledge. Knowledge freely available to the public, as for instance through scientific publications, has been shown to be essential for corporate innovation and productivity growth. The privatization of knowledge can, hence, hamper innovation and technological progress.This project makes use of a natural experiment to investigate the effects of knowledge privatization. It is in general hard to examine the effects of patent systems because virtually all industrialized economies have patent systems in place so that a counterfactual situation, i.e. how an economy would look like without patents, is missing as a required benchmark for policy evaluation. This project will make use of the introduction of software patents in the U.S. in the mid-1990s as an event that allows identifying effects of the establishment of patent rights.This project will, first, investigate the extent to which the introduction of software patents led to a privatization of knowledge. In other word, the switch from publications in academic journals and proceedings to patents by individual software engineers will be scrutinized. In the next steps, implications of knowledge privatization for corporate productivity and industry concentration of R&D will be investigated. Since the introduction of U.S. software patents coincided with the internet revolution control samples from Europe will be used. Europe did not experience an introduction of software patents in the 1990s so that the comparison allows to separate patent regulation induced effects from macroeconomic shocks.