Comments for Markets for technologies: do they really work?

We know there are two possible choices for a patent holder for the use of his patent; Firstly, he can use his patent as a right to exclude to third parties of the use of this innovation. Patent holder can also sale his patent fully or partially or he mays also opt for the granting of a license on the patent.
A license authorizes third parties to exploit or use the invention in whole or in part exclusively or not, and subject to the payment of royalties. So, the transferability of the patent corresponds to assigning the patent or granting one or more licenses. It is therefore an essential function of the patent, since it allows the innovator to appropriate the rents of his innovation, without necessarily having to use the new technology itself. The other advantage of transferability of patents through licenses is that it allows companies to acquire operating licenses for inventions that will complement and enhance their business objectives.

Patents play an important role in the market for new technologies since they will facilitate access and sharing. The market for new technologies is a market where the supply of new technologies (i.e. patent’s holders wishing to sell or license) and the demand for new technologies emanating from companies in order to produce.
So, we are seeing some kinds of collaborative innovations, in the sense that some companies are only specialized in the production of new knowledge while others are only seeking to acquire license rights to take advantage of them. This is often the case in the pharmaceutical sector, there are large firms that have licensing rights on new molecules found by specialized start-ups or research centers.

Granting large operating licenses and reinvesting in research and development allows the development of several other companies within the value chain.
Since 2009, incomes generated by the new technology market have increased rapidly, royalties and licensing fees from the sale of intellectual property assets based on new technologies increased by 9.9%.

To conclude with the market of new technologies, although trading volumes are lower than merchandise trade, the market for new technologies is growing. This will allow many new companies to enter on the technology market both with the aim of acquiring new technologies to continue to innovate or to generate new revenue flows under the licensing framework.

http://www.wipo.int/sme/fr/documents/pharma_licensing.html
http://economie.fgov.be/fr/entreprises/propriete_intellectuelle/Brevets/etendue_protection_brevet/#.WMLzIPk1_IU
http://www.wipo.int/sme/fr/documents/license_assign_patent.htm
Cours licence AES 3ème année – Mme SIMONGIOVANNI

The creation of an efficient market for IP is certainly desirable for both inventors and the consumers of inventions. However, as the article points out, there are some factors that are hindering the efficient transfer of IP. In the following, I will take a look at what both Patent Assertion Entities (PAEs) and public authorities could do to make the transfer of IP more efficient.

A PAE, or patent troll, is a company that buys patents and attempts to make money by filing lawsuits for patent infringement. Even though PAEs are predominately criticized for their doings, they still provide a value in helping to create a well-functioning capital market for patents (Blumberg 2016). Nathan Myhrvold, CEO of a well-known PAE named Intellectual Ventures, wants to create a functioning invention capital system. His company is trying to attract private investors by bundling patents in a portfolio and thereby diversifying their risk. They also use this strategy to lower the transaction costs of their customers, who are often in need for the necessary interrelated patents in order to roll out a new product.
Moreover, the recent emergence of patent backed securities could help to increase the size of the patent market. The fact that it still remains complicated to valuate IPRs is hindering the diffusion of these new and promising financial products
(Myhrvold 2010). This is where public authorities should become active, for example by establishing an organization that is monitoring IP valuation practices. Such an institution would increase confidence in IP valuation quality and enforce generally accepted principles and standards. The transparency problem in IP valuation could be dealt with by introducing an additional reporting section for IP to the IFRS (Expert Group 2013).
Another problem that is hindering the creation of an efficient market are differences in IPR law and IPR culture between developed and emerging markets. The enforcement of stronger IPRs across the world should reduce licensing costs by lowering the incentive for breaching a contract. Furthermore, they give the licensor a better opportunity to set and monitor the conditions under which the licensees operate (Maskus 1997).
Here, public authorities play an important role to standardize IPR law across the world. An example for such an effort is the World Intellectual Property Organisation (WIPO), a UN agency that is responsible for managing several treaties that regulate IP protection.
The TRIPS Agreement from 1995 was further requiring WTO members to follow extended standards for IP protection. More recent efforts include bilateral and regional trade agreements mostly in and between the US, EU and Japan that are seeking a higher level of IP protection. It has also been discussed to include IPR protection in the TTIP (Cîrlig 2014).

In conclusion, both public authorities and PAEs play an important role in trying to decrease the uncertainty that is hindering the creation of a well-functioning market for IPRs. Public authorities should continue to work on stronger IPRs across the world. Moreover, they should support the efforts of PAEs like Innovative Ventures by solving the problem of IP valuation.

Sources:

Blumberg (2016), „Why patent trolls won’t give up“, Techcrunch, URL: https://techcrunch.com/2016/06/05/why-patent-trolls-wont-give-up/

Myhrvold (2010), „The Big Idea: Funding Eureka!“, Harvard Business Review, URL: https://hbr.org/2010/03/the-big-idea-funding-eureka

The Expert Group on Intellectual Property Valuation (2013), „Final Report“, European Commission, URL: https://ec.europa.eu/research/innovation-union/pdf/Expert_Group_Report_on_Intellectual_Property_Valuation_IP_web_2.pdf

Maskus (1997), „The International Regulation of Intellectual Property“, Institute for Agriculture and Trade Policy, URL: http://www.iatp.org/files/International_Regulation_of_Intellectual_Prope.htm

Cîrlig (2014), „Overcoming Transatlantic differences on Intellectual Property“, European Parliament, URL: http://www.europarl.europa.eu/RegData/bibliotheque/briefing/2014/140760/LDM_BRI(2014)140760_REV1_EN.pdf

Market for technologies is one of the biggest market at the moment and, therefore, the most evoluating we kwow. It is too difficut to create laws for regulating this kind of market because it is always evoluating, at each moment.
One of the reasons which can make this sector working badly is that we’re living in a two-hierarchical and vertical system of industries which imply two ways to be regulated. As it is said:

“The transferability of patents (via sale or, more frequently, via licensing) paves thus the way for vertical separation in high-tech industries, with ‘upstream’ firms or institutions specializing in the production of new knowledge and ‘downstream’ firms buying and applying this knowledge.”

Be careful, I’m not saying that transferability is not a good Ip law but i’m saying that those 2 separations systems lead to 2 finalities and, finally, two kind of laws in the same global markets.
We’ve the Ip law where we find the exclusive rights and the transferability rights as principles (upstream and producing firms) and we’ve laws for industries for buyers and sellers (downstream and applaying firms). Ip law is more difficult to sustain because of “patent rights”.

The rules of patent property is an effecient rule but, as we’ve seen before, can result to an innefiency market by the processus of “patent troll”. To avoid this, we’ve to make an unify law (follow myself) which imply all industries in a same systems (producers and applyers) because (I think), we’ve more freedom in a Patent Property systems than in other. So, more freedom can lead to more freedom to cheat and this could be the reason of the issue in transferability law.
A bit like European Union intervention or Pigouvan taxes intervention.
Don’t know exactly whay kind of intervention can we proceed for (taxes, fines, etc) but I know that unifying rules could result us to have more vision on issues.

At the first glance I thought market for technologies was a good idea. Indeed the markets seem appropriate when we think about a place where you can sell the product of your work (in this case innovations). Put them on the market and the ones with the highest valuation would purchase it. It is great for firms that have innovations that they cannot use, or do not want to use. It is also good for firms that do not invest in R&D but that are looking after new innovations. As pointed out by Pluvia-Zuniga and Guellec (2009), there are a few positive economic effects of such markets.

But then I realized that since bigger firms have bigger capacity to buy on those markets, we face asymmetries and thus it might again favour the biggest firms to buy those technologies, leading to a situation of monopoly/ oligopoly where the social surplus is not maximised.
The first reason why they are more advantaged concerns the large costs that firms would face. Since large company have what we can I would call here a “deep pocket”: meaning they have sufficient financial capacity to bear those costs, while the small ones do not, and have to use the market to finance themselves. I use the analyse of Bolton and Scharfstein (1990) to show that in the presence of imperfect financial markets, the big firm would crowd out the small firm, thus leading to a situation where the markets are inefficient and where the government should step in.
The other reason, is that since bigger companies have bigger financial capacity they can buy more innovations making them scarce, or simply bidding more so that the smallest company has no way to purchase it. This could lead to inefficiency since it might be that the small firm sees more utility in this innovation than the big firm but cannot bid more. There, I am thinking about a way where the government could put his nose into the market and look into details when the government considers that this big firm buying this technology would lead to a non-satisfactory situation and would allocate it to the second best bidder (the small firm), which would lead to a better outcome.
Moreover, I thought about when should the government step in. And I thought about what kind of innovations are better for society. In their paper, Jaffe, Newell and Stavins (2004) point out that some innovations are more worth subsidizing than others. In this case it is about environmental innovations, indeed they do not give to the innovator a great added value, mainly because finding a new innovation that reduce pollution -for instance-, does not directly benefit the firm, it will produce positive externalities, for which the firm is not rewarded. It is a thing that the government wants and should subsidize because externalities are “markets’ failure”. As they put it: “The solutions […]: one is to foster the development and diffusion of new technology by designing environmental policies to increase the perceived market payoff and maximize flexibility in compliance. The other is to implement policies aimed directly at encouraging the development and diffusion of environmentally friendly technologies”. This can also be generalized to all activities generating positive externalities, I am thinking about the health sector, but also the educational sector. There is really a leeway for public intervention I believe.
Finally I could think of the role of the state as an intermediary between the sellers and the buyers, but at a lower cost (they would charge a lower fee) than the intermediaries firms on the market, so that more firms are incline to meet and conclude deals that would results in more revenue for the state.
References
JAFFE A., NEWELL R., & STAVINS R., (2004), A tale of two market failures, (page consulted on 2/10/2016), [PDF] Discussion paper, https://core.ac.uk/download/pdf/9308436.pdf
BOLTON P., SCHARFSTEIN, (1990), A Theory of Predation Based on Agency Problems in Financial Contracting, (page consulted on 2/10/2016), [PDF], http://www.people.hbs.edu/dscharfstein/theory_of_p_90.pdf
PLUVIA ZUNIGA M., GUELLEC D.(2009), Who Licenses out Patents and Why?: Lessons from a Business Survey, OECD Science, Technology and Industry Working Papers, 2009/05, OECD Publishing. http://dx.doi.org/10.1787/224447241101

As mentioned in the article, the most important aspect of such a market in my opinion is the cost benefit linked to acquiring a technology as opposed to developing and spending endless sums in an in-house R&D program. This is obviously arbitrary given the fact that the costs linked to purchasing the new form of innovation from a third party still need to be lower than the costs a firm would spend on an in-house R&D department tasked uniquely with innovating.
Another major advantage is the notion of specialisation, a notion also brought up in the blog post. Firms will be able to specialize in what they’re best at for instance a firm whose main strength is to commercialize products will no longer have to worry as much about developing their own R&D programs given the fact that third parties (whose main goal is innovation) will do it for them.
2 birds are hit with one stone so to speak because the commercial firms can focus mainly on their commercial strategy whereas the little R&D firms can focus on what they’re good at which is creating new technology potentially allowing firms to streamline their costs of production.
The market for technology has the potential to be truly prosperous. The small firms focused solely on R&D will benefit greatly from being solicited by other companies and after a repeated effort this could lead to partnerships being formed which is highly beneficial for the firm interested only in innovating.
All this being said, there is still a fair share of scepticism linked to the functioning of a market for technology. If technology is auctioned off to the highest bidder, then firms without the means to match their rivals’ bids will be left behind. This could severely hinder several markets whereby the firms with greater means and in a dominant market position could simply outbid their smaller rivals in order to ensure that they don’t get access to a technology that could help them be more competitive.
Finally, there is an inconvenience that is not negligible: it is the question regarding the complexity of such a market. The transactions are complex and unlike what people are used to in a traditional marketplace. It is a market that, in my opinion, is only in a primitive state which means that numerous questions need to be answered and numerous interfaces need to be constructed in order to ensure the fluidity of one such market. I echo what Mr. Belleflamme says about the potential of public intervention. Public intervention is often vital in helping to regulate and properly/efficiently set up new markets.
In conclusion, we can safely say that much uncertainty clouds the market for technology. In this moment in time, it can either turn out to be a prosperous market that revolutionises the world of business and economics, or it can deplete and fade away if no intermediaries are brought in to ensure its efficiency. At the end of the day, creators can create new forms of technology but if they don’t have a platform on which to easily sell off their work to interested parties, then they may be discouraged. One thing is for sure though, this is a market to keep an eye on.

First of all, this article shows us that the market for technologies is way more complicated than standard market but it also very interesting to analyse.

In one hand, the article points out the difficulties that buyers and sellers meet to find themselves. It also explains that the related costs of a transaction are too large. Finally there is also uncertainty around that kind of market because patterns are uncertain.

In another hand, the article points out the advantages of a market for technologies. The question is thus “What kind of interventions of public authorities can be implemented to help the market for technologies?”

The idea of an European market of patterns that looks like a stock exchange has been analysed in 2010 on request of the European Commission. The conclusions were that such market is kind of utopia because of two reasons: it is difficult to price a pattern and having the rights on a pattern does not mean that you are able to exploit the invention.

I believe that one solution might be public authorities become IP Intermediaries. In their paper, Hagiu and Yoffie define IP Intermediary as “an organisation (firm or not-for-profit entity) that directly facilitates the sale or licensing of patents from owners-creators to users”. For example: The creation of a new European body in charge of being an IP Intermediary could be the begin of a solution. Indeed, such a body could help buyers and sellers to find themselves but I believe it would not be enough to really help the market for technologies.

In my mind, the EU and the public authorities also have to work to reduce the related cost of a transaction. As explained in the article, those costs can be very large and can discourage buyers and sellers. Authorities have to encourage the reduction of such costs. For example, the creation of a standard contract or some policies. But I also believe that buyers and sellers can collaborate on their own, without European legislation, to limit the related costs of those transactions.

As it has been said in the text, patterns are uncertain, it is one of their characteristics. It is thus difficult for the public authorities to intervene on that problem. A company that buy a pattern have to accept that there is a high risk linked to this transaction.

To conclude, a market for technologies has pros and cons. There are some possibilities of intervention from the public authorities to improve that market, but buying a pattern will always be a risk for a firm.

References:

– MENIERE Y. (2011). Vers une bourse des brevets ?. IPdigIT. (https://www.ipdigit.eu/2011/02/vers-une-bourse-des-brevets/)

– EUROPEAN COMMISSION. (2010). Proposition pour la mise en place d’un Fonds Européen des brevêts (http://ec.europa.eu/cip/files/docs/consultation-france-french-government-doc3_fr.pdf)

– HAGIU A. & YOFFIE D. (2011). Intermediaries for the IP market. Harvard Business School. (http://www.hbs.edu/faculty/Publication%20Files/12-023_0e95cdce-abbf-46ea-b8cb-15a3ebb054ed.pdf)

The existence of patents as well as their transferability have created a market for technology and this market has grown substantially over the last decade. It is undeniable that the so-called “transferability”, through the sale or licensing, of patent rights has an overall positive effect on society. Therefore, the creation of such markets enhancing the exchange and spread of knowledge and technology is globally desirable. However, I would consider licensing and the sale of patent rights in two different categories in terms effect on society.

Indeed, I can see at least three positive effects related to licensing of technology. Firstly, licensing makes technology available for a broader set of actors and lower barriers to entry. Therefore, increasing competition in the underlying market. Moreover, licensing also ensures that “assets are used by the agent with the highest valuation” as stated in the present article. Finally, licensing encourages the development of new technologies as it secures even more the return on investment made by the institutions investing in these technologies. Regarding the sale of patents, it is true that this last positive effect of licensing equally applies. However, there is also a risk that companies with too much cash will buy patents not necessarily to use it but rather to prevent other players in the market to benefit from this technology. In such a case, the sale of patent rights would trigger abuse of dominant position, decrease competition and prevent the proper use of the new technology.

As of today, the market for technology is experiencing several issues and is not yet efficient. There are two main issues related to the trading or licensing of a patent. The first one comes from the inherent uncertainty of its valuation (Troy, I., Werle, R., 2008). Indeed, patents being intangible assets with a value that is most of the time only potential and nearly unpredictable, it becomes really hard to determine a fair price. Consequently, the contracts are usually negotiated at high transaction costs and, if any disagreement should arise along the contract creation, the parties will meet in courts, increasing even more the costs of transferability. The second source of inefficiency comes from the fact that “buyers and sellers usually have a hard time to find each other” as stated in the present article. When I look over these issues of trading and licensing patents, it occurs to me that information is key in the market of technology. Moreover, because the society would clearly benefit from a more efficient IP market, the governments should intervene in order to improve the current situation.

First of all, the governments should organize a specific and centralised market place for the trade of patent rights that would facilitate the meeting between potential buyers and sellers. The potential sellers would register the IP they are offering and other information that could be useful for assessing its value. Secondly, the governments could offer audit services or specific tools for patent rights valuation. As mentioned earlier, this is something really difficult to implement but at least some basic tools could help companies to get a rough idea about the product that is involved in the transaction. Thirdly, the governments should make available standardised contracts that could be used for the transaction of different kind of patents or licenses. This way, the parties involved in the transaction would save money on the costs related to the creation of the contract. Finally, referring to my position regarding the potential misused of patents when those underlying are bought, I think that specific regulations should be put in place in order to ensure that the sale will be realised under certain conditions of competition. For instance, the company that acquires the patent would have to prove his willingness to use it for improving the current state of its business.

Sources:

https://www.ipdigit.eu/2013/11/markets-for-technologies-do-they-really-work/

TROY, I., WERLE, R. (2008), Uncertainty and the markets for patents, retrieved online, http://www.mpifg.de/pu/workpap/wp08-2.pdf

What I can conclude of “Markets for technologies: do they really work?” by P. Belleflamme is the market of technologies is complicated. First of all, we are all agreed about the necessity to have IP law to create exclusive rights given the incentive to engage innovations activities before someone else. And its second role is creating transferable rights to make sure agents can use technology and so create a market.
But another important point it the role of patents for the development and the functioning of this market. However market of patents is difficult to organise according these articles for 3 mains reasons. The first one is about the uncertainty of the value of the patent; the second one is the high research costs and finally, the fear of litigation. So how can we make this market liquid and efficient?
This question of liquidity and efficiency can be solved by IP intermediaries. In fact, they can find economic opportunities in proposing solution to market failures.
Personally, I think patents need to exist to give incentive to make innovations. In fact, if we make innovations and everybody can use it, makes profit on it but without having to pay the research cost, I completely understand firm to have an incentive to wait another make innovation before. So patents are important to HAVE innovation and R&D. As says Charles Duhigg and Steve Lohr in an article published in the NY Times on October 2012: “Patents are vitally important to protecting intellectual property. Plenty of creativity occurs within the technology industry, and without patents, executives say they could never justify spending fortunes on new products.”.
But patents need to be clear and not for every single little things. In fact, like says Charles Duhigg and Steve Lohr in an article published in the NY Times on October 2012: “some patents are so broad that they allow patent holders to claim sweeping ownership of seemingly unrelated products built by others. Often, companies are sued for violating patents they never knew existed or never dreamed might apply to their creations, at a cost shouldered by consumers in the form of higher prices and fewer choices.”
And finally a public intervention could be useful to improve functioning of the market but we need to be careful too. In some case public intervention could have the reversed effect. In my opinion, I’m for a public intervention but a specific one and discrete. And other problem I would like to highlight is about the harmonization of patents rule between countries. I find sometime legislation complex to know exactly which law we should take into account. The absence of clarify could encourage firm to derive from good practises in market of technologies.

As explained in this article, the IP law gives two types of right to the patent holder : the exclusive and the transferable rights.
The first one allows the holder to earn money from his innovation by preventing other companies to take advantage of its innovation to make money. The goal of this law is that the owner can be rewarded for his research efforts on the innovation and it makes a profit that will allow him to do further research to innovate again.
The second law allows to give a license to a second part which can have access to the patented technology to improve it or develop it for another use. With this license, the patent owner retains ownership of the technology and the holder of the license supports the development of this patented technology.
This transferability right allows a better scientific and technological development thanks to better collaboration between different specialists working together on the patented technology. This collaboration allows great advances in the field of science, but also allows companies to keep a competitive advantage against other companies in the targeted economic market.
Furthermore, the license allows the vertically division of labor. Indeed, the company that has received a patent for a technology named X may delegate his work to another company by the license. The upstream company that has obtained the patent will work on a new technology named Y, and the downstream company that has obtained the license will develop more in-depth the technology X patented by the upstream company.
This vertical division system allows a better allocation of resources. Indeed, only the downstream company will spend time and money on technology X while the upstream company will devote all these R&D for the new technology Y. By working like this, there will be no more R&D duplication.
In my view, patents and licenses are essential to the development of new technologies.
On the one hand, patents are used to motivate companies to do research to find new technologies and to innovate.
On the other hand, the licenses allow a better allocation of resources. Indeed, some companies (upstream) will focus on research into new technologies while other companies (downstream) will focus on the development of existing technologies.
Both types of firms innovate because the upstream companies are looking for new technologies while the downstream companies improve the existing technologies and find new uses for these existing technologies.
For economic and scientific developments, patents and licenses are, I am sure of it, of major importance.

References :
http://www.wipo.int/patent-law/en/developments/licensing.html
http://smallbusiness.chron.com/definitions-upstream-downstream-production-process-30971.html
https://en.wikipedia.org/wiki/Vertical_integration
http://firstmonday.org/ojs/index.php/fm/article/view/1903/1785

As the content of this article quite extensively recalls, the licensing of patents is very desirable for society. Without going back on all arguments, it allows to have a market for technology and thus a greater incentive for innovation since innovators have more means of getting sufficient return from their R&D investments. Moreover, in high-tech industries, licensing has led to a vertical separation: the firms producing new knowledge and those applying this knowledge are no longer the same. Pluvia-Zuniga and Guellec (2009) hold five positive economic effects coming from this trend. Overall, the same authors found that the two main motivations to license is first earning revenue and second sharing the technology with outside firms (especially when network externalities are substantial).

However, the markets for technology are far from being efficient. One of the main reasons is simply that firms face difficulties to find partners. As Pluvia-Zuniga and Guellec (2009) meaningfully conclude from their business survey: “About 24% of firms in Europe declare having patents that they would be willing to license out but could not (53% of firms in Japan). The figures are higher within licensing companies and still higher among small firms. The major reason for this failure, according to the European and Japanese surveys, is the difficulty in identifying a partner.” Troy and Werle (2008) also found, in their qualitative survey on more than 9000 European patents, that only 13.4% of these patents have been used for licensing. They also describe the reasons for this market inefficiency. For them, this is linked with the inherent uncertainties involved with patent trading, regarding the demand or the value of the patent, which are nearly unpredictable. Finally, as explained by the World Intellectual Property Organization: “Technology licensing negotiations […] have sides whose interests are different, but must coincide in some ways.” The negotiation is often a blundersome process that requires a lot of time and involves high transaction costs. These inefficiencies of licensing contracts, as explained by Arora and Fosfuri (2003), reduce the revenue effect for the licensor and therefore lead to less licensing.

Given all this, policy intervention seems objectively necessary to increase the number of licenses granted and make the market for technology more effective.

After having conducted some research, I have decided to describe one specific type of policy which is the support of business clusters. According to Wikipedia, a business cluster is “a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field”. One worldwide known business cluster is in Silicon Valley in California where we can find a very high concentration of (high)tech start-ups. These clusters create close relationships and collaboration, as well as little distance between firms. In my opinion, investing in such clusters to make them develop and grow could be one effective way of reducing the transaction costs involved with licensing, as well as making the quest of finding a buyer easier. I have therefore investigated if such initiatives do exist. And I didn’t have to look very far: Wallonia has put in place a financing program of business clusters. In 2007, a Decree was released in the frame of which the government can grant a subsidy to a business cluster that “either develops a partnership with a view to its participation in an international co-operation programme or concludes a co-operation agreement between business clusters in order to carry out a specific task, including on an international scale.” This subsidy can raise up to 160,000€ yearly. As one can see, the international aspect of the cooperation projects is very important to be granted a subsidy. That seems indeed to be a promising way of increasing the number of international partnerships with Belgian firms, and thus to help finding partners with who they could share their technology.

I will conclude by saying that, even though increasing licensing of patents is desirable for society and therefore that initiatives such as the support of business clusters is to be viewed positively, the repercussions on the industry are more ambiguous. Arora and Fosfuri (2002) explain, in a framework of multiple licensors, that reduced transaction costs of licensing induces each technology holder to privately license more. However, licensing induces entry in the market and increases competition, and therefore reduces the total profit of the firms. As a result, the licensors would have serious incentives to collide rather than act independently, reduce licensing and increase profits, which, from a social welfare point of view, is not desirable. Decreasing the transaction costs of licensing can thus be detrimental to the diffusion of technology! Policy makers should assess as much as possible all the potential positive and negative effects before taking a decision on the subject, as well as understand how the incentives of licensing are formed.

References:

ARORA, A., & FOSFURI, A. (2002). Licensing the market for technology. Journal of Economic Behavior & Organization, Vol.52, pp. 277-295

GUELLEC, D., & PLUVIA ZUNIGA, M. (2009). Who licenses out patents and why? Lessons from a business survey. Statistical Analysis of Science, Technology and Industry.
http://www.oecd.org/science/inno/42477187.pdf

TROY, I., & WERLE, R. (2008). Uncertainty and the Market for Patents. MPIfG Working Paper. http://www.mpifg.de/pu/workpap/wp08-2.pdf

World Intellectual Property Organization. (2004). Successful Technology Licensing. IP Assets Management Series.
http://www.wipo.int/edocs/pubdocs/en/licensing/903/wipo_pub_903.pdf

https://en.wikipedia.org/wiki/Business_cluster

http://clusters.wallonie.be/federateur-en/financement.html?IDC=346

There is some essential isues with technologies markets.

Such as, if sellers can’t find buyers and vice versa. That will be not efficient. And could lead to a slowind down pace of innovation’s novelties. In order to avoid that problems European Union set up a tool for entreprises helping them to meet potential partners. The Entreprise Europe Network links companies to share their knowledge and to source technologies.
This tools solve also the problem of the price and the transaction cost due to a lack of information.

Another Issue is the absence of transparency on the technologies markets. Indeed, innovative ventures cannot know if there is already the same innovation in the queue, waiting to be patenting. It creates waste of time and dupplicates innovative researchs. A solution could be a register which you can easely access and where you have all the potential patents awaiting. So innoventive ventures will be clearly aware of what has already done.

To finish , the authorities could standardize the procedures of the contracts to make easier the deal between owners and buyers. Common and clearly rules will likely prevent from derive and abuse.

Source: http://een.ec.europa.eu

I think that a good example to improve the market of technologies is given by the history. It is the decision of UK when the country joins the EEC to harmonize norms of patent rights. Actually, the length of patent rights were not the same in UK than in the EEC. It lasts 16 years in the UK and 20 in EEC.
So the old patents were prolonged of 4 years. During these 4 additionnaly years, the patent was “transformed” in a licence of right.The dechnology protected is so available for everyone who want to use it but it provides an income to the innovator and clearly protect the incentive to innovate in research for new technologies. In case of failure of negotiations, a controller of patents (Intellectual Property Office of UK ?) sets the conditions of the licence.
What I think is that a such “Patent Office” and the decisions it can take are good for the market of technologies. Actually, I think if all intellectuel properties (for technologies, not art, design etc.) were licences, the market would be improved. Effectively, with this type of maket, the incentive to innovate is protected and the concurrence between licensee and innovator can be effective on the market of goods. And more, with this type of institution, dominant position abuse can possibly be prevent (by not according licences to concurrents).

The market for technologies has several economic benefits, however there are some requirements that must be fulfilled to a profitable operation. On one hand, the economic consequences of the market for technologies include the diffusion of innovation, specialization and reduction of transaction costs. On the other hand, some requirements must be followed in order to make this market profitable.
As the text pointed, in this market there is the need to have both buyers and sellers interested because large costs are wasted during the negotiating process due to the fact that there is an information asymmetry. So, in order to improve the functioning of this market, public interventions must be provided. These interventions must ensure that all information about patents is provided to both parts involved. In my opinion, in the market for technologies there is the need for an intermediary process that allows stakeholders to communicate in an efficient way. This process should reach the goals of both sides of the market and, as a consequence, will reduce transaction costs. As an example, an exchange platform for Intellectual Property rights could be created in order to facilitate the interchange process as it provides all the information (centralized).
Regarding real world examples concerning this market, based on the “European Commission recommendation on the management of Intellectual Property”, we can say that there are two different mechanisms to regulate the market, such as a recommendation to the members and two codes of practise. This instruments can be described as guides to improve the efficiency of the market.
To sum up, I consider that public interventions should be stimulated in order to increase the efficiency and profit of IP markets.

Sources:
http://spp.oxfordjournals.org/content/30/1/4.abstract
https://www.google.pt/?gws_rd=ssl#q=technology+public+intervention

Following the courses, laws on IP increase the incentive to develop a market for technologies because that allows exclusivity and transferability of intellectual properties. Firstly, exclusive rights ensure that innovators get the adequate return from their innovations. Secondly, transferability allows the innovators to get the maximum profit due to his intangible asset. However, high uncertainty in trading leads to high transaction costs which prevent an efficient market. Moreover, the current patent system impeded these innovations because it does not scale with experience. So there is no advantage by buying for the 100th time. Secondly, there is the problem of “the valuation of patents” which is one of the bigger problem in this sector. Indeed, because there are no procedures to measure the value of IP and because there is no obligation to disclose the IP, some companies will prefer to hide IP to the public in order to avoid concurrency. This situation has to be solved to increase the incentive to innovate. Did the public authorities have to make interventions on this market? And how did they have to do?

Since this technology market is quite locked by these problems, solutions have to be found. Firstly, about the transaction costs, the the coase theorem is the first thing I had on my mind. It says that in absence of transaction costs, and if IP are well-define, it will result in an efficient allocation. Thus, maybe the authorities should work in order to try to decrease these transaction cost. But how could they do that?

Following “meso-nrw” website, there are different ways for governments to reduce transactions cost. Firstly, to be in an effective and efficient legal system will reduce transaction cost because it will decrease the uncertainty of procedures, or the fear to reveal his IP due to a lack of rules on the valuation of patent. Thus maybe some institutions could be created in an international point of view to create laws about “patents valuations”. Companies will have more incentive to disclosure their IP to make accurate valuation and to earn to fair return. Secondly, another solution (illustrated later by “Asia intervention”) could be to integrate IP into public education. It will increase the IP awareness across society in general and moreover it will create a generation where the share of knowledge is logic. And finally, a system of “tax incentive” could be made in order to increase the incentive of companies of sharing their knowledge. Always in the same way, but in my meaning this time, a system with subside in R&D could be created. I mean that the government could give some subsidies to firms but only if they are invested in Research & Development. For that, as told in last week discussion on the smartphone patent wars, it’s very important to create common international laws.
To illustrate these solutions the case of “ASIA” is perfect. Following the “Asia drives the transformation of the global patent economy” article, it seems that Asian governments have taken several common steps in developing their innovative competences.

Firstly they have, after they joined IP institutions and legal conventions (such as the World Intellectual Property Organization (WIPO), the PCT and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs), they have established dedicated Intellectual Property High Court in 2005 which granted several courts competence over specific domains. When a legal system that conformed to international norms had been established, the focus shifted to judicial enforcement of that system. These first solutions are in line with our expected solutions.
Secondly, as explained before, national authorities have try to promote the innovative skills at school. In order to train people to think in an innovative way, to make the word “innovation” become their leitmotiv. They have done that in order to increase the share of knowledge, the investment in R&D, and to improve patent quality. Across Asia, the politics want to encourage innovation and it has reached new heights, and this is often recognized as a core policy goal.
Finally, to conclude this example we could say that Japan, Korea, Taiwan and China have reinforced their legal and juridical frameworks, and ramped up public investment in research and education, thus making IP a principal lever of national economic growth.

To conclude, in my meaning, authorities have to be involved in this technologic market because like every new markets, it has to be optimized, common standards have to be create to ease such sharing of knowledge and to ensure the fair returns for innovators from their inventions. The best solution and the most applicable one for me is to implement tax incentive system and subsidies.

-http://www.meso-nrw.de/toolkit/tools/tools-costs-analysis-2.html
-http://www.athenaalliance.org/weblog/archives/2014/11/new-study-on-patent-licensing-costs.html
-Miyuki Monroig and Patrick Terroir, “Asia drives the transformation of global patent economy”, IAM, July 2013 on http://www.innovation-economie.com/
-http://www.rpxcorp.com/
-http://fr.wikipedia.org/wiki/Th%C3%A9or%C3%A8me_de_Coase
-http://www.minfin.fgov.be/portail2/belinvest/downloads/en/publications/bro_r_and_d.pdf
-http://en.wikipedia.org/wiki/Tax_incentive

Inventions which are patented usually have transferable rights that makes it possible of their purchase and sale. This has led to the formation of markets technology markets in the modern economy whereby companies like Microsoft, IBM etc are making billions of money from the sale/rent of their patent thickets. At the industry level market for technology can lower barriers to entry (entrants can use the existing technology to lower production costs) or promote competition.However intervention by responsible bodies is needed to prevent the abuse of this rights and improve the efficiency of this markets.

The EU in its Innovation Union Communication outlining a medium term strategy for innovation in Europe includes an action aiming at improving the economic exploitation of Intellectual Property Rights (IPR). Action 22 in 2011, the Commission made a proposals to develop a European knowledge market for patents and licensing. This was intended to build on Member States experience in trading platforms that match supply and demand, marketplaces to enable financial investments in intangible assets, and other ideas for breathing new life into neglected intellectual property, such as patent pools and innovation brokering”.
In the Conclusions of its meeting on 4th February 2011 , the European Council invited the Commission to “explore options for setting up an intellectual property rights valorisation instrument at the European level, in particular to ease SMEs’ access to the knowledge market, and to report back to the Council by the end of 2011”.
We can conclude that the market for technology works but needs more intervention by antitrust authorities in order to regularize the functioning of this markets. this will make firms put more incentives in R&B,especially research labs for they will be guaranteed of recouping their investments in this activities.
Major fields that show much presence of this technology markets are chemical,biotechnology,software,computer and electrical fields.

References
European commission-enterprise and industry-intellectual property
Markert for technology and their implication on corporate strategy- Oxford Journal

We live in a world where innovations are being done almost every moment and patents are being filed all around the world at a growing speed every day. The matter would not have been of much concern, if the filed patents were independent and were not affecting each other anyhow. However, the story is different today. We see multiple players playing in various sectors fighting for the same innovations each day.
Let me take an example of the smartphones (as we discussed in our last week’s blog), where patent wars is no more a new phenomenon. Multiple companies work on the same base innovation and fight for innovating before others just in order to file a patent and gain over other in terms of the so called innovation.
With this market for IP rights growing at this pace, it becomes necessary to create a market where sharing these IP rights can become a much easier concept. The benefits of having an efficient market has been well enumerated in this blog post.
One thing which I believe hampers an establishment of such a market is the improper legal framework that we have today. If we look at the facts, we can see how many pending IP rights claim are there in the courts all around the world. And the growing rate of patent wars has been catalysing this process every day. If a public intervention can be done that can make the settlement of IP rights disputes better and faster, the players in the market can feel easier to carry on with the research and innovations they are doing without having to worry about the disputes they may run into later.
Another support that a public intervention can provide can be with respect to create an environment that supports innovation. This will lead to the entry of multiple players in the market and thus broadening both the breadth and depth of the innovations. The question that arises here is how to go about creating such an environment. I can think of two ways here. First would be with respect the tax benefits or exemptions, one might get with respect to innovation. It can also be in terms of tax benefits while buying or licensing patents. Second would be to create an open source pool, where various players can pool in together to work on a same technology, thus reducing the costs. An example could be the Android Operating System, which is an open source OS and various players (like Sony, Samsung), would work upon them as they want to modify it.
Last thing that I can think on top of my mind would be to soften the process of patent filing. Things like “no need to file patents in multiple countries” could aid this process and thus help in creating an efficient market for technology.

It has been clear that the normal functioning of markets for technology has been suffering, in particularly because patent trolls. In this comment I want to nuance the aspects of universities in the context of the functioning of the markets for technologies. Furthermore I’ll point out the place of SMF(Small and medium sized firms) in the licensing market and the importance of the unitary European patent package.

Universities can play a major role in a better functioning of the market for technologies. In Belgium there are few specific rules that exist to regulate the intellectual property rights of university-created research (Milken, 2006). Anyway a good example of an intervention that has been made to improve the functioning of the markets for technologies in Belgium is that one of the decree for a division of the net proceeds among inventors, departments and universities. Firstly in Flanders in 1991(for Flanders) and then in 1998 (for Wallonia). Since the implementation of these decrees we’ve been seeing a big rise in the importance of patenting by universities.

Since these decrees, important institutes have seen the light. In 1995, VIB was founded. The VIB is the Flemish interuniversity for biotechnology. VIB shows that patented technology transfers from universities to companies can be well commercialized. Anyway there is still a long way to go.(Milken, 2006). Another Belgian example is the LRD. It is KULeuven research & Development entity to promote the transfer of knowledge and technology. The entity is separated from the university. The LRD shows is a good example of how an university can develop and use the advantages of licensing agreements.
http://ttoflanders.be/en/member/ku-leuven-/
http://www.ecu.edu/cs-acad/ott/upload/milken-institute-mind-to-market-2006-2.pdf
The counterpart of this is that Universities could maybe become too focused on the commercial aspect of new inventions, which could counter the development of good academic research.

Secondly, It’s interesting to see who licenses proportionally the most patents. In a paper by Zuniga and Guellec (2009), they say that the firms that license proportionally the most of their patents are big firms and very small ones. There is clearly an informational identifying problem to license out patents for SME (Small and medium sized firms). In my opinion, public entities should intervene to give SME more visibility on the level of patent licensing possibilities because licensing is a very hard business. At the other hand in an article written 5 years ago on Ipeg.com they conclude that Europe’s licensing system don’t really need more governmental focus but that it is up to universities to teach that licensing is an important profession in order to avoid the “uncertainty problem”. This conclusion joins partially with the statement in a paper by Troy & Werle(2008) saying that seminars and workshops have to be set up to create awareness, that patents are a worthy object of trade, and to strengthen expertise among future business managers, lawyers, and other professionals.
http://www.ipeg.com/patent-licensing-in-europe-still-a-long-way-to-go/

Finally, we could consider that the unitary European patent package is another good example of an improvement of the functioning in market for technologies. But actually it is not so true like it seems to be. I would say that this has brought a lot of difficulties. Follow a paper by the max Planck institute for intellectual property and competition law there are at least twelve reasons for concern and that the content of the European patent package has to be reconsidered again. Source : http://www.ip.mpg.de/files/pdf2/MPI-IP_Twelve-Reasons_2012-10-17_final3.pdf

It is clear that public intervention and the implementation of laws has been improving a lot but we’ve arrived to a point that implementation of patent law-constructions, as the Unitary European patent package for example, cannot improve anymore significantly the functioning of the market. Seemingly the creation of awareness that patents are a worthy object of trade, has become more and more a priority.

So, do the markets for technology work?
On the one hand, the first aim of the market is to facilitate the exchanges. In this case, the technologies are sold and bought. The Transferable rights are respected; the economic role of IP law is respected.
On the second hand, the high costs related to that specific market make it unprofitable and therefore, the markets for technologies might be inefficient.

It is quite accepted that when a market fails to deliver its purpose (market failure), the government is supposed to intervene to regulate the exchanges with public interventions.

In the case of the market of the technology, which are the public interventions feasible?
– Creating patent pools could transform the costs of many negotiations into a cost of one bigger negotiation. The costs of negotiations are therefore reduced and the exchange becomes profitable again.
– Creating a platform where the sellers and the buyers of licences and patents can find each other and meet easily. Thanks to that platform, it becomes easier and cheaper to sell and buy patents and the costs linked to the identification of a potential buyer/seller are reduced.
– Creating a clear legal environment. A huge cost linked to the patents is the suits costs. When the law is reinforced and very clear, useless and cloudy prosecutions will not happen as often as it does now. Therefore, large savings are also made.

Those are some measures that a government could take to facilitate and to improve the market of technology. However, I think that those measures should be taken (at least) at a European level rather than at a country level: the market of some countries might be too small and push the actors to go to see across the borders. Those measures would then be inefficient if the problem is the same at a supra-national level.

The transferability of patents help the high-tech industries get profits and improve revenues in the telecommunication market. However, the less information of market transaction could be the barrier for exchange and trade IP unprofitable. Public intervention and some policy measures works on this issue in some extent.

The less information connection between buyers and sells cost a lot for trading of patent right. If the patent owner did not get enough profit on the market, as the less information transaction or have the goal to seizing he market, they will not be motivated to invest in innovation and the new patent, which they will continue holding the patent and using the original patent to get decreasing profits. Some policy measures could be help to profit the patent through sale or licensing which improve the patent valorization on the market. Gains from trade of patent and licenses could be regarded as a more efficient way to generates additional incentives to invest in the new patent. Policy intervention could encourage the short term form of patent valorization.

The first instrument is building the exchange intellectual property rights (IPR) platform, in order to match process between potential sellers and acquirers by centralizing information on available needs. The main task of these platform is to attract the small and potential buyer and sellers, let more patent registers in different countries could get access to information from each other, develop the further patent database. In Europe, Patent Register of the European Patent office is a key instrument to provide companies to develop innovation.

The second instrument is to establish the standard guidance or advice in view of reducing screening, information and negotiation cost. However, only standard guidance is not suitable to the patent by different commercial situations. Local implementation of consultant should guide the small partners depending on the local market situation. In Europe, we could suggest the Enterprise Europe Network step up the local service to prove legal, commercial and managerial support to valorization. It is also works enhance the patent exchanging by financial support to develop technology. The principle of subsidiarity is to cooperate with other local public authorities.

The third instrument is using the patent funds from the third public authorities. This way could be reduce the transaction cost through founding the patent pool and for future development in order to attract the relevant patent holders into a joint licensing scheme. In Europe, the patent pool shall be in compliance with EU state aid and competition policies.

Reference:
1. Understanding Innovation: The Role of Policy Intervention
2. Options for an EU instrument for patent valorization

There is a need for public intervention to improve the functioning of market for technology. The public authorities may intervene with some different means. I will try to expose the most important intervention that address two principal types of costs that result in market failure: the underutilization of IP and the wrong pricing problem of technology.

First, public authorities should organise and subsidize an intermediary market between the seller (the IP patent owner) and the buyer (the product developer). This intermediary market provide a meeting point that bridge both parties easily. An automatizated version could be done, for example an online patent exchange platform worldwide used.
Secondly, there is a need for standardized procedures and norms so that the contract between both parties follows a guideline and prevent to sellers to set the price they want for their technology. This strategy could help to provide a “fair price” for buyers.
Third, transparency is crucial because it allows the process of patent application and patent process to be clear for everyone. Moreover it reduces the lack of information.
Finally, the public authorities should promote a system of partnership between universities and industries. This type of behaviour promote exchange of knowledge improve competition among firm and allow a commercialization of universities R&D results which is valuable for the reputation of the university.

Some interventions are already set up. For example: the market for green cars. The European Commission publish new measures in order to promote car makers to invest in CO2 reduction technologies. On the one hand ‘The European Green Cars Initiatives “will provide financial support to research in this scope. On the other hand, the member states will give reduction of taxes for low CO2 cars user in order to stimulate the purchase of that type of car.

Source:
https://faculty.fuqua.duke.edu/~charlesw/s591/Bocconi-Duke/Bocconi/S2_2008_02_11_MFT/Cockburn_-_Is_the_Market_for_Technology_Working.pdf
http://www.forbes.com/sites/ciocentral/2012/04/18/the-emerging-global-market-for-intellectual-property/
http://ec.europa.eu/news/energy/110830_en.htm
http://ec.europa.eu/research/transport/road/green_cars/index_en.htm

First of all, as we saw in class, the recent updates in IP laws have had a positive impact on the development of a functioning market for Intellectual property and technologies. Indeed, these rights give the incentives to invest in research and development as it ensures the inventor to have exclusivity and the right to transfer that IP if wanted.
But the main problem on that kind of IP market is that a high level of uncertainty exists: they are a lot of information asymmetries. On the side of the patent owner: the patent lies in a coded form and often the inventor’s knowledge exceeds the technological information that lies in the patent. On the other side – the buyer side – the economic agents have little information about the quality and the efficiency of he patent before they buy it.

For an intellectual property market to perform in an efficient way, all market agents’ needs to have access to information about the patents specifics, the cost of obtaining information should not be too high. We thus need transparency on this kind of market and the various governments’ need to create an appropriate legal framework for IP market.
Now a day, the main problem is that both sides – buyers and sellers – are reading to trade patents but they meet the difficulty to find each other. We can illustrate that by showing that in Europe – for example – there is no intermediary market for Intellectual Property. And as said in a WIPO article (1): “We know that no market has grown without a sizeable intermediary sector (…)”. Thus, what is so far missing is a system that will match the needs of both sides on the marketplace. To do so, the authorities have to go beyond patent registration. They will have to provide specialists that will analyze, categorize, value, trade patent a very large scale. They should be the intermediary between buyers and sellers as they have all the information needed.

Furthermore, the governments could use various tools to promote the diffusion of knowledge and the transferability of patents. First, as it is already the case, public authorities should continue to subsidize universities and public research funds. And then make all this knowledge available to the public at very low cost (or even for free). Besides, in my opinion the system of scholarships given by the government is a good way to promote innovation. Indeed, it gives incentives to the best “students” to go to university and to undertake some research. Besides, the public authorities could use the “voluntary buy-out patents” technique. This technique consists in buying a patent from an inventor and then allows all the economic agents to use it freely. Then, it is really important that the public authorities intervene to reduce the transaction costs on this market. In order to do so, they have to provide a legal framework that is extremely precise and complete. As examples, we can quote the tries from the IOS (International Standard Organization) and the WIPO (World Intellectual Property Organization). Indeed, in 2013 the WIPO has launched a new marketplace for economics agents that were seeking for shared innovations, IP rights and new technologies on the “Green” market.

To conclude, I think that governments should not be the only one to seek for solutions. Even if they are well placed to do so, because of their goal to maximize social welfare and to promote the diffusion of knowledge. The various governments should also come to an agreement about what the legal framework of such a market would be. They have to provide precise and complete laws to ensure that information will be easily accessible for all the economics agents.
I also think that companies should try to be more involved in the development of IP marketplace as it could considerably lower their costs (R&D costs, transactions costs, …) and allow them to be more efficient.
Finally, the public authorities should have in my opinion the role of intermediaries as describe in my comment earlier. They could bring buyers and sellers at a low cost. Furthermore, they don’t seek to make profits but their first goal is to increase public welfare.

Sources

http://www.wipo.int/export/sites/www/sme/en/best_practices/pdf/european_ip_market.pdf

http://www.uspto.gov/news/publications/IP_Report_March_2012.pdf

http://www.owen.org/musings/ip

http://www.wipo.int/pressroom/en/articles/2013/article_0025.html

http://www.mpifg.de/pu/workpap/wp08-2.pdf

The development and the productivity of technology markets are enhanced by the creation of patents. It tends to smooth the exchanges and to reorganise technology markets in a more convenient way. Patents allow the spread of knowledge and expertise, not only in order to overcome information asymmetries and to provide information but also to decrease the transaction’s costs on these markets.
Trough these cost’s reduction and information’s release patents are able to support innovative firms on the market.

Nevertheless, due to the increasingly large number of IP rights, patent transfers become more and more affected, for instance by the existence of large costs incurred through the writing and the negotiating of licensing contracts. When you make a deal, it’s essential that each entity is able to find its own interest in order to reach the best agreement that will satisfy everyone. However, due to the information’s asymmetry, organisations spend a lot of time and money trying to achieve a consensus about technologies transfers, even sometimes without succeeding to clinch any deal.
Indeed, if you want to develop the market of new technologies in a convenient way, buyers and sellers have to find a common ground. As buyers are companies that produce and sell innovations to the end users, they will agree to buy technology only through a price at which they will be able to reach their breakeven point using these new technologies. In the meantime sellers, who are focus on R&D researches, want to set the highest price and they will succeed to do so.

Therefore, I think it’s essential that public authorities allow the access to patent system information and be involved in the innovation market failures; they have to find a way to lower these transfer prices. For instance, they should start by removing all barriers to have access to the right information of the market or by subsidizing organisations in their researches and promoting at the same time the entrance of new firms on the market of new technologies.

Whatever the decisions they will take, I think it become essential that government takes drastic measures in order to prevent abuses and inequities. They have to take care of the roles of each actor on the market and carry out the development of these markets in a good atmosphere where the progress and rewards would increase the total social welfare. It could enhance the incentive of various actors to enter the market, which is exactly how start to make a business flourished.

An interesting example to be studied is the country of Israel in the context of technology innovation. The nation has one of the highest densities of technology start-up firms globally. It currently has around 4800 tech startup firms and attracts the highest amount of venture capital per person. The government intervention has been significant in ensuring that a sustainable market for technology exists. It took the following steps

1. Investment incentives and capital market reforms – The Law for encouragement of Capital Investment(LECI) was passed enabling domestic and foreign capital inflow into R &D sectors.
The law did not explicitly favor the high-tech or any specific industrial sector, 9
but, rather, ventures with high value-added and marketing capabilities in local and international markets.

2. Government support for R&D- The Israel government currently spends around 4.6% of its GDP on R&D

3. Incubation Initiatives – The Government initially launched the Magnet program designed at attracting the succesful Israelis working in the Silicon Valley to return and set up their own firms and provided them with the first round funding and support(the military played a major role ,especially the Data analysis wing, by often acting as the customers).
4. Venture Capital creation – Israel also created a market friendly environment for venture capitalists by providing them with various sops and privileges.

Thus , as a result of direct public intervention, currently the technology market in israel is thriving

As outlined in class and this discussion, IP laws fostered the development of a functioning market for technologies especially because they created exclusivity and transferability of intellectual property. However, high uncertainty in trading (either selling or licensing) in this market exist, information asymmetries make negotiations difficult and high transaction costs prevent an efficient market. The coase theorem suggests that in the absence of transaction costs, an efficient allocation of property will be reached through private bargaining. But as noted in a review of patent licensing and transaction costs, licencing often does not take place due to too high transaction costs. Doing research on how governments may improve the functioning of a technology market, several aspects where found. Some of these are outlined in the following.

First, as explained above in the logic of coese theorem, public interventions may reduce the transaction costs in the technology market. One way to reduce transaction costs is an effective and efficient legal system. In times of globalization, just to consider last weeks discussion on the smartphone patent wars, it seems to be especially important to agree on common international standards in order to enhance the market for technologies. In a framework act on intellectual property it is suggested, for example, that Korea’s government should contribute to the harmonization of domestic and international intellectual property laws. To give more concrete examples, first one can name the efforts of the international standard organization (IOS) to create an international standard for patent evaluation in 2008. Unfortunately, their proposal to have a project team working on this was rejected by several countries. Another example is a US law introduced in 2002 which requires companies to disclosure certain intangible assets.

The US economy has been moving from a manufacturing focused one towards one focused on intellectual capital. Still, it faces issues occurring on its market for technology. One is related to problem of the valuation of a patent. As there are no common procedures how to measure the value of intellectual property and rules that companies have to disclose their intellectual property to the public are missing, companies rather hide their intellectual property due to a fear of competitors. To alleviate this effect, an idea could be to create incentives for companies to disclosure this information and start evaluating their intellectual property more accurately. One way to do so could be tax incentives. With the R&D tax credit, the US has a tool to promote investment in R&D. However, this credit is only provided for the creation period of knowledge. With an extension to a permanent tax credit companies could be further stimulated to evaluate intellectual property, which would spur a more efficient market for technology. Another way to improve evaluation of intellectual capital is increasing investment in research on evaluation methods. This seems to be needed so that the high degree of uncertainty in technology markets can be reduced.

Last but not least, in order to decrease transaction costs, the government could more promote the formation of patent pools.This may be especially valuable for the US as the legal guidelines for antitrust implications are in place since 1995 and proved to work well in a review in 2007. To conclude, a serious of actions can be taken by governments to improve the markets of technology. However, some of them are particularly difficult to implement and many factors and perspectives need to be considered. As an example, a government that aims to reduce transaction costs, needs at the same time pay attention that it does not itself create additional transaction costs that are even higher than the original ones.

Sources:

Kenan P., Jarboe R., (2008), Intangible Asset Monetization: The Promise and the Reality, Athena Alliance

http://www.meso-nrw.de/toolkit/tools/tools-costs-analysis-2.html

http://www.wipo.int/edocs/lexdocs/laws/en/kr/kr087en.pdf

http://www.athenaalliance.org/weblog/archives/2014/11/new-study-on-patent-licensing-costs.html

http://www.iam-magazine.com/blog/Detail.aspx?g=04c39ef2-5788-41e7-b772-7db5d103bb5d

I believe that the creation of a market for technology would be a positive boost for the patent system and a good improvement for innovation; a vertical process, where you can transfer the patents between firms for money or just by licensing, it would also be a good way to eliminate the many useless patens that are created not for innovations but in order to prevent rivals to implement a new technology.
As we saw from the article a market for technology derives from the possibility of having transferable rights; transferability will obviously have some positive effects on the market. As pointed out by Pluvia-Zuniga and Guellec the division of labour increases the diffusion of technology, reduces duplicative inventions and increases downstream competition. Certainly having a market for technology come with some costs and difficulties.
One of the biggest problems would be trying to coordinate buyers and sellers. It is, often, hard to create a market/platform that enables a good interaction between researchers, innovators and firms.
Another possible problem that came up in my mind are the costs related to mediation and contracts, this is a problem that could actually be solved by public interventions; in fact the speed of negotiations can be increased and the complexness of contracts could be revaluated whit specific public reforms that may limit certain loopholes in the patent system. I believe that the Obama administration actually took a step in this direction in 2011, instead of an average wait time of almost three years now they guaranteed a 12 months turnaround. http://www.whitehouse.gov/the-press-office/2011/09/16/president-obama-signs-america-invents-act-overhauling-patent-system-stim
This are only some of the many problems related to market of technologies and, in order to work, there has to be some intervention by external intermediaries.
An intermediary (or go-between) is a third party that offers intermediation services between two trading parties. The intermediary acts as a conduit for goods or services offered by a supplier to a consumer. http://en.wikipedia.org/wiki/Intermediary
Typically the intermediary offers some added value to the transaction that may not be possible by direct trading.
Something that can ease the process and can allow a reduction of uncertainties, would be to lower and control asymmetries in information; obviously if information are clear transferable rights are easier to do. I believe that a way to do so would be to increase spillovers between companies and researchers in universities; if they have enough information between each other they would be able to work while reducing costs and don’t waste time in implementing the same innovation.
A good public intervention could be through the creation of a specific platform that can help find and match buyers with sellers, that helps new entrants to develop their businesses and eases the process of transferability by financing the cost of not knowing where to look for.
As I stated at the beginning of the comment I strongly believe that the creation of a market for technologies, therefore having the possibility of transferable rights, is in favour of innovation and can bring many economic positive effects. In order to achieve something greater, though, I believe that the role of intermediaries is crucial; they make the market for technologies work better they reduce the costs and the problems that I stated above, intermediaries are useful to match and identify potential partners. Their role is also to introduce businesses in the market and help them find some missing information, in this sense public authorities could be the best intermediaries, they are a third external party that should have has their final goal an increase in the public welfare.

The market for technology presents a lot of advantages (facilitates transfer, reduces transaction costs,…) but also some drawbacks (contracting can be sometimes very costly, or buyer and seller don’t find each other…). Therefore, we see that public intervention is needed in order to regulate this market for technology. I will base this post on the “European Commission Recommendation on the management of IP in knowledge transfer activities and Code of Practice for universities and other public research organizations” from the 10th of April 2008 (Brussels). Here, we will see that the European Commission (EC) uses 2 different tools in order to regulate the market: a Recommendation to the member states and two Codes of Practice: one for the universities and public research organization directly, and one for the public authorities in order to regulate this knowledge management in the sector of universities and public research.

First, the EC presents a recommendation list to the Member States, which recommands them notably to: ensure that all public research organizations define knowledge transfer as a strategic mission, encourage public research, support the development of knowledge transfer capacities and take steps to encourage open access to research results. They should also adapt their national legislation on basis of this recommendation, take steps to ensure the implementation of the Code of Practice, ensure equitable and fair treatment regarding the ownership of IP right and inform the Commission every two years of the measures taken.

Second, the Code of Practice for universities and public research organization consists of three main principles:

1) The principle for an internal intellectual property – these organisms must build an effective management of the IP resulting of the collaboration of- or their own- activities. This is by: developing an IP policy, which would provide clear rules for staff and student, promoting identification, exploitation and protection of IP, giving incentives and promoting knowledge dissemination.

2) The principles of a knowledge transfer- focus more specifically on the active transfer and exploitation of IP. This can be done by: developing licensing policies, elaborating clear principles regarding the share of returns and taking in consideration the exploitation mechanisms and partners.

3) The principles for collaborative and contract research- concern all kinds of research conducted jointly by public and private organization, either by collaborative or contract research. This concerns mainly: the ownership of the IP, the access rights and the compatibility of each party.

Third, the EC provides a list of practices that must be taken by public authorities in order to facilitate the transfer of knowledge in universities and public research organizations: the knowledge transfer must be part of the strategic mission of these organisms, there must be public policies in order to regulate them and sufficient resources, incentives and support must be given to the organisms. Moreover, there must be a coherence in trans-national cooperation, the dissemination of knowledge should be facilitated by open access to research data, publications etc. and finally, necessary mechanisms should be put in place in order to monitor and control the transfers of knowledge.

As conclusion, I think that the EC, by producing this official Recommendation, and the two Codes of Practices, really tried to intervene and regulate this complicated market for technology. The Commission clearly encourages the member states to foster public research, support knowledge transfer and therefore take the appropriate measures in order to monitor it. Moreover, by this way, the EC ensures a certain unicity between the member states about the management of knowledge transfers.

SOURCE:
European Reasearch Area. (2008). Commission Recommendation on the management of intellectual property in knowledge transfer activities and Code of Practice for universities and other public research organisations. Online http://ec.europa.eu/invest-in-research/pdf/download_en/ip_recommendation.pdf consulted on the 4th of December 2014.

According to me, the country who seems to be the most adapted is the United States of America. Why? Because they put in place “help services” for the firms that claim laws and rules regarding the transparency, the misuse, the updates and the checking of patents.
In fact, sellers find with many difficulties their buyers or often trade might be unprofitable due to heavy licensing costs.
However, concerning Europe, they put many institutions in place in order to answer those same needs. But it has not already been the case, it took a long time before having regulation in this field between all the different european countries.
For instance, the Organisation for Economic Co-operation and Development focus on improving the technology market by highlighting many objectives such as a better diffusion of technologies and transparency, a decrease of patenting entry barriers …
More locally in Wallonia, the local government decided, in 2004, many rules through the Plan Marshall such as gathering the firms into clusters regrouped by field of research (Biotech, green energy, …). This clarity gives incentives to firms to innovate seeing that they can do more easily business with companies that they have a lot in common with. As a consequence a strong network has been created, reducing their negotiating costs, and currently their only objective is to go forward.

Sources:

http://www.oecd.org/

http://www.steunpuntwse.be/system/files/overwerk_2005_4_07.pdf
« Le plan Marshall: cinq actions prioritaires pour l’avenir wallon »

The problem of enhancing the efficiency of the market for technologies is made incredibly complicated by the absence of clear-cuts and types in the field of technology and innovation, a problem that is inherent and pervasive: as we define innovation as “something new”, we cannot expect it to fall into pre-existing categories by definition, and the same can be said for the contracts related to it.
Prima facie it would seem reasonable to suggest to “cluster” previous documents and contracts into categories in order to help the making of future contracts but I doubt that creating such “database” would change drastically the situation due to the huge amount of data it would contain and the specificity of every contract, the analysis of which requires additional time and costs, while not eliminating the risk of not finding the necessary “inspiration” (i.e. not finding an adequate model to follow for writing the contract in due time).
Again, it could be tempting to decide to allocate subsidies in order to reduce the inherent costs of such contracts, but how in practice should these subsidies be allocated?

a) To everyone that asks for them, disregarding the efficiency issue. But what if the contract is unnecessary or, even worse, fictitious? Of course some kind of regulation would be needed.

b) The subsidy is awarded with a decision based on the “importance” of the contract, which reflects the importance (i.e. the beneficial effect) of the innovation. This kind of subsidy is, by necessity, awarded ex-post and thus its relevance must obviously be discounted by the probability of obtaining it. Even more, since the probability of obtaining the subsidy is directly correlated in this case with the probability of a successful innovation, in truth this kind of subsidy would not help at all to resolve the initial uncertainty problem on the profitability of signing a contract, because it would simply state what is plainly observable (i.e. if the contract was a good investment when it is already clear it was.)

c) The subsidy is awarded following a regulation that takes into consideration only procedural elements and not substantial elements related to the profitability of the patent. This seems the most reasonable and auspicable solution, but since it doesn’t depend on the magnitude and importance of the contract, it is probably incapable to increase the incentives to make contracts in a balanced way, which is exactly the same problem as with patents themselves, with the one-size-fit-all duration always too long or to short to enhance efficiency in the correct way.

In short, in my opinion there is no “simple allocative solution” that could resolve this problem in one move, and there is also a strong trade-off between intricacy of the solution proposed and the increased costs/reduced benefits of it.
What I would suggest is, from a broader perspective, to use education in order to increase the social interest on the topic of patents and related contracts and to form not “a cluster of documents” only, but a sub-culture of specialists that is formed directly at the university level on IP studies which are for now – to the best of my knowledge – mostly accessible only at the Master level or above.

It is evident that patents play a major role in helping ensure that technology is developed and used efficiently by creating exclusivity and transferable rights. They promote vertical separation and specialization and help avoid duplication of efforts. In effect, they have created a market for technology. But like all markets, it is beneficial only when it is efficient.

A market is more efficient when it has a large number of participants i.e., buyers and sellers. This is limited in the market for technology because of asymmetry of information about existing patents and their applicability. Public authorities can counter this by creating a transparent, regularly updated platform with information publicly disclosed, perhaps at a small fee to compensate for its cost. The growth of the U.S. economy during the 19th century was characterized by a dramatic increase in innovations and specialized inventors. Laws stimulated the diffusion of technology at this time through public disclosure. Patents with their detailed specifications were required to be provided to the Patent Office, which maintained a central storehouse open to all.

Another barrier to an efficient market is the lack of a strong legal environment which can enforce the patent rights. Patent wars are expensive and have become more common. They particularly are more damaging in developing countries with weak and long legal processes. The U.S. Patent Act adopted a rigorous examination system where applications are diligently scrutinized by trained people to ensure that the invention really is deserving of a patent. This decreases the number of patents issued in the first place and eases their enforcement in legal courts. Such laws can alleviate concerns about the validity of patents and encourage more participants in the market for technology.

What the EU (and other governments) could simply do is trying to give subsidies in order to reduce these negociating and writing licences costs. So at first make the unprofitable potential technology sales profitable. For each firm ready to try to get a technology using a license with an innovator, the EU should give a financial compensation to those costs. So the incentive to get the technology from an external innovator will be stronger, and the incentive to sell the technology will be also stronger ofr the innovator himself. The EU already tries to encourage innovation, with for example the objective of each member country to invest 3% of their GDP in R&D for 2020. So why not investing in market technology instead, in order to avoid waste of time and money for innovators that are less able to launch their innovation on a market (and at the same time, seeing firms invest in too much R&D without a concrete result).

Furthermore, the tax system could be adapted for the licence costs. If those licences are lesse expensive, firms will have more incentives to use it. Again, as EU member countries agreed on the innovation development, each country can try to make the licensing systme more attractive. But everything has a cost…

Finally, the EU should encourage a technology market in all the european countries, allowing firms in every country to collaborate with foreign innovators and the opposite too. Trying to connect innovators and firms together. There are many ways to manage it. Organizing european corporate meeting (subsiding it), develop programs between universities and firms accros the whole EU, etc…

All of this is also valid outside of the EU.

My example is about patent legislation in the high-tech issues in US.
In 2011, the Leahy-Smith America Invents Act (AIA) was initiated. The AIA put in place mechanisms for post-grant review of patents and other reforms to boost patent quality. In addition, court decisions clarifying the scope of patentability and guidelines implementing those decisions diminish the opportunity to game the patent systems. However, innovators still face challenges from entities who develop a business model “to leverage and hijack someone else’s idea and extort benefits out of them.” On June 4th, 2013, the White House announced issued five executive actions designed to protect innovators from frivolous litigation and ensure the highest-quality patents in patent system. The Administration announced a number of steps to bring about greater transparency to the patent system. In these action plans, the patent office started to require patent applicants and owners to regularly update their ownership prior to the proceeding of patents. By doing this, the patent office better controls the patent or application. The PTO also provided targeted training programs to the examiners on the scrutiny of functional claims and developed strategies to improve claim clarity, for example, by creating glossaries which include patent specifications to help the examiners in decision makings where highly sophisticated technologies are involved.
Furthermore, the Administration encourages more engagement with the shareholders, including the patent owners, the research institutions, and the end-users, public-interest groups, and the general public. Following this, a set of out-reaching programs were initiated. For example, a 6-month events across the country to develop new ideas and consensus around updates to patent policies and laws were organized. Also, an expansion of scholar program were introduced, bringing in academic experts, and allowing the public to get access to robust research data regarding key litigation issues. The patent office together with the trade commission held several rounds of workshops and roundtables among innovators and interested groups in 2012. These kinds of activities provides valuable input to the legislation process itself but also facilitates the information flow among the innovators.

Reference: http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf

In this comment i chose the India’s war on intellectual property rights. In this country (which is one of the last in terms of protecting intellectual rights) patents aren’t always respected and one of the consequences is that some companies invest millions of euros in R&D without have any return. On average the development of a new drug take 10 to 15 years and has a cost of $1 billion. So if a firm spend so much money they have to obtain a patent to prevent the manufacture of cheaper generics

But we know that companies have to continue to invest money in R&D to innovate. There is really a problem about the pharmaceutical patents because the Indians can not buy the patented drugs. There are so expansive and people needs to product his own range of generic. Therefore the Indian government reacts and tries to cancel some patents. For example, indian government would revoke the patents on the drug “Herceptin” (a breast-cancer drug) which was under protection until 2019 and others on drugs of companies like “Pfizer”,… The government fights against the production of generics drugs which are not legal because there are onder patents … and also to secure the people.

source :
http://www.forbes.com/sites/sallypipes/2013/09/16/indias-war-on-intellectual-property-rights-may-bring-with-it-a-body-count/#b015aa

Any underdeveloped market has high transaction costs that are even higher for technology, given all the existing uncertainty about the assets. Also, transaction costs are normally lower if the market is standardized and if there is high liquidity. Hence, governments could try to organize this market in some way, starting probably by asking universities to have a portfolio of patents and other IP rights ready to be seen by any potential buyer (of the patent or just the license). These portfolios should be available in some online platform, in order to create a better match between buyers and sellers. Another event that does not contribute to the efficiency of the technology market is companies/other entities holding “inactive” patents to keep competitors away. Governments should encourage these entities, which have been holding inactive IP rights for a certain number of years, to either use it or sell it. This way others would be given the chance to make use of the patent and explore some opportunity. This type of patents could even be sold at discount. The government’s role would be creating some institution to put these unused patents into a secondary sale or at least enabling interested parties to make offers to companies who hold it. In addition, the process of buying/selling a patent should be standardized and simplified as much as possible.

To improve the market of technology, we can argue that helping the entry in the downstream market could be a good idea, but the problem is that in the upstream part, firms invest in R&D and with the excludability and transferability can deter the entry. Firms wanting to enter the downstream market must invest in high sunk cost of R&D or buy the right to use the patented technology of an upstream firm. Some countries, such Sweden find the way to increase the efficiency of this market.
I’m talking about Swedish Competence Centers, which aggregate three partners, Industry University and State. To create and strength R&D networks the State subsidizes around two third of the total amount the link between Industry-University, this way they promote innovation and are sure of the efficient use of resources, and avoid wasteful duplication of existing technologies.

http://www.vinnova.se/upload/dokument/Verksamhet/Starka_FoI-miljoer/Kompetenscentrum/NUTEK%20CC%20Programme%20Feb00%20memo.pdf
http://www.technopolis-group.com/resources/downloads/reports/419_V-Centres_published.pdf

I am not sure whether this example is correct or not for public intervention. But I think this is good for thinking about patent right.

In Japan, from 2002 the previous prime minister Koizumi start to emphasize the right for intellectual property. And in 2005 intellectual property high court was established. This means that the governments tried to protect the right for intellectual property. And now for accomplishing its mission, the court has some powers which ordinally courts don’t have. The court deals with the problem of intellectual property including patents’ problems and inform about the situation or rule in Japan regarding patents, intellectual property. Thanks to this court, not only Japanese firms but also other countries’ firms are able to get the information easily and make success their strategies of innovation or technology.

In this case, I think, public authorities make intervention indirectly and this results in helping acceleration for innovation. In this way, we can say that intervention have good impact on patents’ work because the public authorities make the reliability for patent better. I also think that it is true that patents have the aspect of transferrable right but we should remember they also have the aspect of exclusive rights. I mean that public authorities make the aspect of exclusive rights larger than the other one, because for private firm, the certification from public is the best reason for their activities. So, I am worry about the market inflexibility by over-public intervention.

Source: http://www.ip.courts.go.jp/index.html

The environmental economy (commonly known as Green Economy) is one of the field of research which is mostly influenced by the public authority decisions around the world.

With awareness of the pollution problem, the EU was the first one to implement a new system in 2005, the first and the biggest emission trading scheme in the world (Australia implemented a similar system afterword). The project, started in 2005, for the European Union Emission Trading System (EU ETS) is now the biggest pillar of the EU climate and environmental policy, and was created to respect the Kyoto’s agreement in environmental matter, with the reduction of the CO emission in EU by 21% in 2020.

At a glance, the ETS is a a project which set a “cap and trade” system, under which the countries of the EU can produce a certain quantity of greenhouse gas every year (cap). At the end of the year, the countries which produced less quantity of greenhouse gas can sell their quota to countries which have consumed more of their “initial” quota (trade). If you don’t get those quota, you will pay an heavy penalty to the UE.

Now, the question is: what is the connection between innovation and the EU ETS?

The connection is in the economic growth in production of power generation technologies which was caused by the introduction of the EU ETS.

The introduction of a market for the pollution (which value is worth millions of Euros) is a strong inducement to develop new technologies which grant the production of less greenhouse gas. The over twelve thousand industries and power plant in the project all needed the development of new technologies, with subsequent races for the production and the implementation of those new technologies from numerous firms in the pollution control devices, as dust collection systems, dissolved air flotation (DAF) and powdered activated carbon treatment and vapor recovery systems.

This higher demand of most efficient way to control pollution have reflected strongly on the investment in R&D from firms which produced such devices, and this is I think an important, example of indirect influences of public authority in the innovation field.

In the last few years, numerous papers about this connection have been published, proving the impact of this regulation on the innovation field. I think important papers is this field are the one from Karoline Roggae and Volker Hoffman which studied this phenomena in Germany, and the one from René Kempa, and Serena Pontoglio which studies the general environmental economy problem.

Sources:
http://www.sciencedirect.com/science/article/pii/S0921800911003909
http://www.econstor.eu/dspace/bitstream/10419/28521/1/61067661X.pdf

It seems very clear that markets for technologies do not work the same way as a normal commodity market. The main issue in this kind of markets is the latent uncertainty behind it, but also very high transaction costs. In fact, the uncertainty comes from the fact that the nature of knowledge in itself is very uncertain. Knowledge is very tacit, it’s not easy to define property rights and the value of technology is thus often very hard to assess. Furthermore there is also uncertainty in competition : the firm which want to buy a patent (a technology) might be afraid that a competitor could find a new (better) innovation.
This is why in this sort of markets, it is more efficient to have intermediaries. These companies have different roles which results in different services. It can be assessing the quality of a technology; identifying the right partners and matching them, but also creating trust between upstream and downstream firms.
Considering all of this, I think that authorities should try to deliver policies which encourage the development of these intermediaries, especially in their role of matching upstream firms with the right downstream firms. In fact, the main problem according to me is the lack of information of the downstream firms which prevents them from “daring” to buy technologies, which implies that there can be good quality technologies which are not sold at the end of the day.
I would also like to speak about the so-called “bandwagon effect” which applies quite well here. This public economics concept is a way to explain why companies (and society in a more general way) can be stuck in low-quality standards, in a permanent way. If, in an industry, only one firm uses a technology (which might be better than the one used by other firms), but that it ends up providing a good that consumers don’t understand, or find too difficult to adapt to, this new technology might not break through, even though it would’ve been better for everyone. We need to take into account the fact that we need a sufficient number of potential consumers to make the use of a technology profitable.
All of this might also be an explanation of the fact that firms way seem reluctant buying new technologies (or at least less than we could expect). This raises the uncertainty and thus the risk. This is why I think a good policy for such a concern could be to encourage the use of better technologies by helping them to spread, or by informing the consumers about the perks of the innovation, etc.

http://ec.europa.eu/dgs/jrc/downloads/files/kt2010/201011_kt_presnetation_prager.pdf

A very free market of technologies with the patents and license playing the role of stock actions is probably the best way to increase the transferability of tech. That transferability, as said in the article, is very important to allow all the actors of the society to enjoy a new technology. And not only some companies that can have a kind of exclusivity on an innovation.

But every market has its danger. Like the financial market has the speculators wha have proven to be the cause of big problems for banks, the tech/patent market have what is called the Patent Assertion Entities (PAE) or called by critics patent trolls.

« Patent Assertion Entities (PAEs), called patent trolls by critics, are companies that typically do not invent or manufacture products but instead buy or license patents from others, primarily for the purpose of obtaining licensing fees or filing infringement lawsuits. »

These companies are a real problem in the market of technologies. In addition to the heavy cost of licensing fee or the price of litigation around a patent, all due to these PAEs, there are abusive lawsuits on what can be called “basic ideas”. PAEs go after small and medium sized firms because they use things like a shopping cart. It is more than important that regulation comes from public authorities in order to cut off such abusive use of patents. In the US, as a response and very recently, they introduce “The Innovation Act” that “aims to increase transparency and accountability in the patent litigation system.”
It proves that the market of technology is a real concern (at least in the US). To meet the good effect of the transferability, government should at least control and watch over the market.

For example, decreasing the time and difficulties of the negotiation over a patent can diminish the transaction costs. And, they can achieve that by a standardisation over the transaction of a patent. As the Innovation Act, institutions can regulate the market with compulsory action (like give back an adapted and legal accountability) for any firms that trade intellectual property.

http://www.reuters.com/article/2013/10/29/us-usa-patents-hearing-idUSBRE99S0YN20131029

I agree that government intervention is necessary to improve the market for technology. I would like to point out two cases: compulsory licensing of patents set by law and research organizations.

Compulsory licensing set by law is a good example of public intervention to the property right issues. This speeds up technological development and increases social welfare. An example is an issue which we have been talking about previously, Malaria medicine, and licensing it to developing countries. This increases social welfare and well being drastically in developing countries, but the companies also need to make a profit, to cover development costs. The dilemma is commonly solved through compulsory licensing, as the real price of the production license or drug would be too high for the patients in developing countries. Another example might be the mobile industry, specifically the producers and developers of telecommunications infrastructure. In this case however the companies have also their own motives to grant licences. For instance Nokia or Siemens, who both produced and developed infrastructure and mobilephones could have developed such a superior wireless technology that was only accessible with the company’s own phones. This would have lead to market distortions and huge inefficiencies. This is why compulsory licensing has been present to some extent also in the telecommunications industry and the level is also increasing (http://keionline.org/node/1663).

My other case is governmental research organizations which also develop patents and then license them to everyone willing to buy the license, which mainly covers the cost of R&D. However if a company has been funding the research they might receive the first opportunity to license (others getting the license later) or even buy the patent. This latter practice should not happen, but I hear it does… The main aim of governmental research should be to increase the level of technology and increase the competitiveness of the industry. We have also discussed of the practice where governments or organizations buy patents, just to let everyone use it, increasing social welfare. This practice should also be used more widely in my opinion.

According to the article, markets for technology are implicated in the diffusion of innovation and new technologies. It is a way for a company which needs a particular innovation to find it and benefit from a significant advantage against its competitors.

However, when doing researches on the Internet, it is no easy to find a lot of examples of those markets for technology. Only a few public authorities provide support in order to meet supply and demand. A public authority in the EU that can be found on the net is CORDIS: “the Community Research and Development Information Service. It is the European Commission’s primary public repository and portal to disseminate information on all EU-funded research projects and their results in the broadest sense”.

Source: http://cordis.europa.eu/home_fr.html

On the other hand, there are also private companies like: Innovation Québec: “Founded in 2012, Innovation Québec is a private firm specializing in economic and technological innovation research and consulting services. Innovation Québec provides a strategic watch and conducts case studies on innovations in private and public companies, both in developed and emerging countries.”

Source: http://innovationquebec.com/

Both of those sites are innovative in the field of markets for technology improvement, but this is not enough. Markets for technology are still in the earliest stages of their development in many industries.

In my opinion, the leading public authorities around the world must work together in order to improve the functioning of markets for technology through the share of information.

Sites like CORDIS could be improved to give the same services provided by “Innovation Québec” (which is meeting supply and demand) but also be extended to a worldwide public network. This could be done using a social network interface like Linkedin for example in order to promote new technologies and to help companies to find the innovation they are looking for.

According to me, a potential worldwide association of the leading public authorities would be an important step on the way to efficient markets for technology and innovation’s diffusion.

To develop a market for technologies two actors are needed: Buyers and sellers.
The buyers are the companies who want to produce and sell the innovation to the final customers while the sellers would be companies only focusing on the research to find new technologies.

However the buyers would buy a technology only if the transfer price is lower or equal to the cost to develop this technology in his own R&D department.
In fact, it’s the same as the company outsourced its R&D department.

But as the buyers are currently more abundant on the market than the sellers, the prices for new patents are too high.
Public authorities have to find ways to reduce this price and make it lower than the cost to do everything by oneself. Solutions to reduce the transfer price could be to make easier the transferable rights, reduce the cost for negotiating, writing licensing contracts or gives advantages to research companies like subsidies. Make the seller position more profitable to stimulate the creation of new research companies or improve the communications of universities about their new technologies.

Nevertheless subsidies and fewer taxes are artificial ways to move the price of the market so the public authorities should only remove all legal obstacle to have the true price on the market. And if the true price on the market is still too high, markets for technologies aren’t maybe the solution we are looking for.

The markets for technologies are very important for firms, and for innovation, they helps create new ideas and helps smaller firms to get the access to technology. Like the article says, there are certain numbers of barriers to the optimal market.

If the costs of negotiating and writing licensing contracts make the trade of IP unprofitable the only solution is of course try to reduce these costs. But another difficulty is the complex structure of the different markets for technology, like stressed in the article “buyers and sellers usually have a hard time to find each other”. The solutions to that problem are numerous; first we have in each country (EU) an “Innovation Fair” or “Technology Fair” where firms present their technologies for which they are ready to sell a license, and others firms can also browse the available technologies and find what they want. But these fairs stay at a local/national level.

In a recent (2011) EU Tender represented by the Institute of Technology Management, we can find some propositions to improve the functioning of such a market; for example reduce the fragmentation of the IPR markets, and tend to create a Global European IPR market with the same rules for every country (EU) that will increase the confidence of actors, facilitate the transactions and the circulation of the Intellectual Property with more information and the same valuation methods for the patents.

source

http://ec.europa.eu/enterprise/policies/innovation/files/creating-financial-market-for-ipr-in-europe_en.pdf

It is made clear in this post that there is a need to diminish transaction costs in order to ensure an efficient and well-functioning market for technologies. Transaction cost is a catch-all concept, and therefore it is valuable to distinguish between different kinds of transaction costs. Carl Dahlman is doing so in a seminal paper, “The Problem of Externality” (1979). He first considers search costs, or the costs related to the search of a partner (patentee or licensee) to trade with. One major problem in the market for technologies, especially in the case of cumulative innovations, is that patentees are encouraged to ‘hold up’ new innovators. This in turn increases search costs as new innovators want to avoid being ‘hold up’. Dahlman then switches to bargaining costs. Negociating involves considerable costs, both administrative ones (writing down a contract) and strategic ones (in particular when there are a large number of parties involved in the process). Last, there are monitoring and enforcement costs that are incurred to ensure that parties comply with the terms of the agreement. In order to smooth the functioning of markets, decision-makers should therefore resort to policies that are deemed to decrease search, bargaining, and monitoring and enforcement costs.

References

Dahlman, Carl J. “The Problem of Externality.” Journal of Law and Economics 22.1 (1979): 141-162.

Althоugh that Lamоreaux and Sоkоlоff(1997 and 1998) have dосumented the рresenсe оf an aсtive market fоr teсhnоlоgy in the US during the late nineteenth and twentieth сenturies, markets fоr teсhnоlоgy seems tо be in the earliest stages оf develорment in many industries and faсe many institutiоnal оbstaсles and struсtural сhallenges.

Trade in teсhnоlоgy is nоt sо advanсed as it shоuld be. This рrосess сan be imрrоved thrоugh liсensing. The divisiоn оf labоr between develорment aсtivities and researсh is faсilitated by selling the R&D рrоjeсts thrоugh liсensing. The оverall effiсienсy оf the innоvative рrосess сan be imрrоved by this vertiсal sрeсializatiоn. Unfоrtunately, the liсensing instrument is underutilized by SMEs. Mоstly, this is beсause liсensоrs fear unсertainty regarding the рrоteсtiоn оf their intelleсtual рrорerty, inсluding trade seсrets. Оn the оther hand, оften the severe restriсtiоns that соme with liсense agreements, make liсensees reluсtant tо aссeрt it. These in turn are the result оf liсensоrs being оverсautiоus tо рrоteсt their interests. The viсiоus сirсle is соmрleted. A lоt оf wоrk has tо be dоne tо make the liсensing оf knоwhоw and trade seсrets mоre aссessible fоr thоse whо need it mоst.
In the EU firms alsо faсe infоrmatiоn рrоblems. These suggest an imроrtant rоle fоr роliсy initiatives direсted at inсreasing transрarenсy оf markets fоr teсhnоlоgy thrоugh better рubliс reроrting оf IР transaсtiоns and their eсоnоmiс imрaсt. Aссоrding tо the exрerts “mоre extensive and regular соlleсtiоn оf data оn trade in teсhnоlоgy by gоvernment statistiсal agenсies wоuld be very welсоme.” The Register оf the Eurорean Рatent Оffiсe (EРО) соuld be seen as a key instrument tо рrоvide соmрanies with an easy aссess tо рatent infоrmatiоn, and tо enable market-driven intermediaries tо develор innоvative tооls fоr searсhing рatent databases, and thereby reduсe sсreening соsts.

There is alsо laсk оf standardized соntraсts and market nоrms gоverning transaсtiоns.

There are many оbstaсles in markets fоr teсhnоlоgies, sо роliсy makers shоuld рlay a key rоle in the imрrоvement оf сritiсal market infrastruсture, as imрlementing lоw соst, timely, and рrediсtable disрute resоlutiоn meсhanisms reduсing unсertainty abоut the sсорe, validity and enfоrсeability оf intelleсtual рrорerty. These соuld be aсhieved by refоrming the рatent law,better funding and management оf рatent оffiсes.

http://ec.europa.eu/enterprise/policies/innovation/files/options-eu-instrument-patent-valorisation_en.pdf

I will give an example of the Indian Pharmaceurical sector. In this case, such policies aren’t implemented yet but as we can see, such policies SHOULD be implemented because there are some regulatory lapses that bring down this industry.

In the past, the Pharmaceutical industries was very promising and was considered as a defensive play for investors. It was a low risk industrie thanks to the steady and inelastic demand. The defensiveness-which is the ability to generate constant returns and earnings irrespective of the overall sentiment of the stock market -of the sector was very good.

But the sector has changed a lot this recent years, overseas expansion ha brought intense competition and disputes relating to violation of patents have increased the risk profile of the sector. Volatility of the sector has increased consitenly which is in oposition of the defensiveness of the sector.

The Indian Pharmaceutical sector therfore needs policies that encourage patents trade and that punish the violation of other’s patents!

Source: http://articles.economictimes.indiatimes.com/2013-05-25/news/39521492_1_caraco-pharma-sector-sun-pharma

The European Commission have the objective to make the car industry stronger and more competitive by reducing the CO2 emissions. The European Union must maintain a world-class automotive industry, able to produce the most energy-efficient vehicles and the safest in the world, while providing highly skilled jobs for millions of people.

Regarding R&D, to encourage the green results, the European Commission is working on common European patents (unitary patent: a standard patent for the EU that will be both simple and more affordable) and joint productions in the equipment or batteries in particular.
There is no doubt that the loss of the automotive sector would be disastrous for Europe in terms of R&D because they represent an irreplaceable support in terms of innovation (new materials, nanotechnology, electric batteries …) and technological know-how / industrial.

Another help was the financing. To allow a revival of the demand, the government gave bonuses for the least polluting cars hoping to promote electric cars. But it doesn’t really work.
Also the EIB reserved loans for production cooperation, exemption from competition rules stating that the battery is of strategic interest. And thus, allowing auto makers to pool their costs to invent the future vehicles.

To conclude, the automotive industry is facing new challenges. Between the crisis, regulations for CO2 emissions and sales in Europe which fall down, it should set new goals and evolve to keep its place in the European economy. The European Commission changes the landscape of the automotive industry by the regulations but to boost the industry in a long term view.

Source :
– http://ec.europa.eu/news/energy/110830_en.htm

In its paper called “Is the market for technology working? Obstacles to licensing inventions and way to reduce them”, I. Cockburn identifies two different types of costs that result in market failure.
First, the “deals not done” that lead to an underutilization of IP. These would take place if the social welfare was increased with the transaction. We must thus find ways to lower the obstacles so that the transaction becomes socially profitable.
The second type of cost is the wrong pricing problem for technology. As a consequence, resources may not be optimally allocated in such a market.

The lack of information about prices and transactions were found to be the major causes for these costs. The paper highlights several means to reduce this asymmetry of information.
First of all, the government should help and subsidize the specialist intermediaries between license holders and products developers. These would act as “IP marketplaces” that aim to facilitate the contact between both parties.
Furthermore, the public sector should also work at increasing transparency on the market for technology. That would include the creation of “registries” in which you could find the name of the true owner of the patent. It thus requires the disclosure of this name. The goal is still to bridge license owners and users.
Finally, creating standardized norms and procedures for the writing of contracts could also facilitate the transactions.

Source: Cockburn, I., (2007), “Is the Market for Technology Working? Obstacles to Licensing Inventions, and Ways to Reduce Them”, Conference on Economics of Technology Policy Monte Verità June 2007

An interesting article in Forbes (1) of the chief Patent counsel at IBM explains how IP market has been and is still getting more and more importance.

He considers indeed IP like any other economic asset, which is now at the basis of a global market. Like any market, this needs to be regulated, more or less according to a country’s economic policy.

In this article, the author explained what has been implemented in the US and what should be changed in other countries to foster the development of a global IP market. He gives the example of the American Invents Act enacted in September 2011. This Act would “improve the quality of patents by enabling third parties to submit information related to USPTO”.

Still in the US, transparency should be an important field of improvement in the IP patent market. This will make all the process about patent application and patent process more transparent and clear for everyone. Consistency has also to be improved. There is a difference between the way US courts issue patent injunctions, reflecting the modern market conditions, what the US International Trade Commission does not do correctly. Harmonization is thus needed.

The author also advocates for a global harmonization of the patent market and system. Collaboration among countries and firms in different countries would be welcomed to favor investment and the development of an efficient IP market.

(1) http://www.forbes.com/sites/ciocentral/2012/04/18/the-emerging-global-market-for-intellectual-property/

First of all, I would like to give my point of view on these markets for technology. I think this transferability is best for the society: we can find tons of examples where inventors were not able to launch their product on the market. I personally believe this is because inventors don’t always have the required understanding of market diffusion. It is bit like them saying: “since I think my product is a good one, everybody will be interested and buy it”. However, it is often not the case: they have to really work on their initial invention and also be able to modify it to fit what the market really wants. Inventors are often reluctant to be flexible since they could consider that their invention is their “baby”. In other words, since inventors are not always able to manage well diffusion on the market, it is best to offer them the opportunity to sell it and thus secure a return on their R&D investments. This has of course positive consequences on the society as a whole.

On the other hand, the markets for technology could be harmful to the society. In this article, Pluvia-Zuniga and Guellec say that it lowers the barriers to entry. I personally think this is not the case: indeed, if entrants don’t have the means to buy patents on these markets, they are confronted to higher barriers to entry. The only case in which these barriers are lower is when the entrant has the means to either buy a patent or invest in R&D internal research. In both cases, the entrants have to be able to cover such costs. Another problem with this is that big companies could buy patents they don’t want to exploit just to block the possible entrants in their market. If this happens and it is not controlled by governments, this could be highly harmful to the society: indeed, this would lead to more concentrated markets with big firms blocking the new entrants by buying “useless” patents. The markets for technology would thus be faced with problems such as abuses of dominant position. Governments have thus the responsibility to control that the purchases in these markets are not harmful to the society.

As I said, what governments should definitely do is create control mechanisms like the ones used to detect, prevent and punish abuses of dominant position. These mechanisms would allow these markets to develop in a more legal and socially-oriented environment. Once these rules have been put in place, the reason for purchasing a patent will be to exploit it and not anymore to create a profitable competitive environment for big firms. These kind of initiatives from the governments will thus bring more potential customers on the markets for technology which is a way of developing these markets.

Being a student of finance, the first image that comes to my mind of a marketplace is a stock market. Loosely described, a stock market is an aggregation of buyers and sellers; a loose network of economic transactions of items that are largely intangible (commodity markets being the exception). As such, it is possible to set up exchanges where IP can be bought and sold. A quick search on the internet led me to the website of IPXI, an IP trading exchange head-quartered in Chicago (http://www.ipxi.com)

The concept behind this exchange is interesting. The fundamental unit of trade is a ULR or a Unit License Right. This ULR effectively grants the purchaser a one-time right to use a particular technology in a single product. For eg. a new type of airbag sensor in a car. If a company wants to use the technology in 100,000 cars, it buys 100,000 ULRs at the market price. ULRs are also expected to be traded on secondary markets.

This method of licensing IP has multiple advantages for both the buyer and the supplier. Firstly, it greatly reduces the transaction costs by providing a transparent and efficient marketplace. Secondly, it greatly facilitates non-discriminatory distribution of technology, so every buyer knows they are paying the same price as other buyers. Thirdly, the supplier does not have to worry about the pricing of the technology, since the price will be market determined. It also allows the supplier to monitor the adoption and reported use of a technology.

However there is still the issue of monitoring the fair use of technology by the buyer. For eg. it is possible that the buyer purchases less ULRs but uses it to produce more products. Thus it would be important that such exchanges have a robust mechanism to monitor the use and expiry of ULRs. And as with any other stack market, the efficiency of the market will be determined by the number of buyers and sellers. So without a large no. of participants, the effectiveness of price determination may be bought into question.