Intellectual property rewards

Shavell, S. and T. Ypersele (1999), Rewards versus intellectual property rights , Cambridge NBER working paper no 6956. 

In interdisciplinary endeavors, department chairs have a number of administrative barriers that cause them to be reluctant to engage in partnerships (1) how to distribute expenses for necessary materials across departments (2) how to allocate the time commitment of faculty across departments (3) intellectual property issues and (4) the burden of adding electives in addition to core coursework. To overcome barriers in interdisciplinary endeavors, department must see the value in collaboration. A reward system to motivate these partnerships may encourage interdisciplinary collaboration and encourage departments to see the value in collaboration outside their departments, but other value propositions must also be identifled. 

There are really only three possible routes (1) use the commercial market through the patent system to determine the rewards to the innovator, (2) base rewards to innovators on therapeutic benefits, and (3) do not bother measuring at all. Option (1) is the patent system, but this functions poorly for neglected diseases. Advanced Purchase Commitments use option (2) in a half-hearted way, as I describe below. A system of Transferable Intellectual Property Rights, described below, uses option (3). The key issue is that in the absence of meaningful measurement of health impacts, it is necessary to base rewards only on commercial success, and that is not consistent with a mission to improve the health of the poor. 

There are at least three very important flaws in the basic mechanism proposed by Project BioShield II (and Transferable Intellectual Property Rights in general). First, the way the reward for the innovator is financed through a patent extension is inefficient and inequitable. Second, the incentive mechanism is poorly defined, and does not offer a clear methodology to determine how large a reward to pay for a given innovation. Third, the mechanism discriminates against small firms. 

First, then, consider the way that financing is raised for this mechanism. Essentially, Transferable Intellectual Property Rights offer a way of providing an off-the-books financial reward to companies that develop some socially desirable innovation, such as a vaccine for HIV/AIDS. Ignoring the effect on innovation for the moment, consider how this financial reward is obtained. The innovator is rewarded with a wildcard patent extension of, say, two years... 

In sum. Transferable Intellectual Property Rights are a type of reward system that (1) is extremely inefficient in the way it raises funds to reward innovation, (2) offers no plausible methodology according to which it could allocate rewards, and (3) discriminates against small innovative firms in favor of large ones. 

One of the criticisms raised against the Optional Reward plan is that the measurement of DALYs is imperfect. A system of Transferable Intellectual Property Rights avoids this criticism by replacing imperfect measurement with uninformed guesses as to therapeutic importance. 

ShaveU, S., and T. Van Ypersele. 2001. Rewards versus Intellectual Property Rights. Journal of Law and Economics 44(2) 525-547. 

Ownership in real and intellectual property can be secured by a number of different legal mechanisms. Those who invent new and useful products and methods can be rewarded with a govemmentally granted exclusive right to make, use, and sell the invention. 

The message to any researcher and Manager is exploitation of the unexpected is a difficult activity but one which has high rewards when successfully achieved. The results provide a genuinely novel opportunity for the company to exploit the sole rights of the associated intellectual property. 

Protecting books, therefore, would be a way to salvage the sacredness of authorship at the same time as a way to protect capital - the link between literary property, aesthetics and economy could not be clearer. Another argument of Lamartine s, often used by defenders of literary property, hinges around a comparison between physical and intellectual work. After reminding his audience of the fact that labour other than intellectual is rewarded by perpetual property, Lamartine goes on to describe the situation of the writer ... 

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