Community Research and Development Information Service - CORDIS


SOFTPAT Report Summary

Project ID: 631712
Funded under: FP7-PEOPLE
Country: Luxembourg


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

Description of the work performed during the reporting period
During the first part of the project working time an extensive literature survey has been conducted on the economics of patents and software patents in particular. In addition, a careful study of the legal conditions for the patentability of software in Europe and the U.S. has been executed. Background reports have been written. Next to the literature studies, the majority of the time has been invested into the creation of databases. A collaboration with Thorsten Doherr at ZEW, an expert for matching algorithms, has been initiated in order to match the different data sources. The database for the first part of the project is complete and checked for consistency. The construction of the firm level database for work package II and III has been started. Next, the analysis for the first part of the project has been conducted. However, further robustness checks are required before the results can be released.

Description of the main results achieved so far
The gathered data has been analyzed. Preliminary results from a difference-in-difference analysis confirm that the publication activities of U.S. information technology experts decreased relative to the control group of European experts after the introduction of software patents. As further robustness checks need to be conducted before the results can be approved, released as working paper and submitted to conferences and international peer-reviewed journals, I refrain from discussing them in more detail at this point in time.

Expected final results and their potential impact and use
Preliminary results from a difference-in-difference setting show that the publication activities of U.S. information technology experts declines relative to a control group of European experts. It is expected that this result will be confirmed by further robustness checks. Such a finding would not only be interesting for academic scholars, but also and especially for innovation policy makers that are confronted with the decision to introduce patent protection for a new type of innovation. For both audiences the results of the first work package will improve the understanding of the effects of the introduction of intellectual property rights on the publication of scientific results in the public domain. The results can also deliver insights into the discussion around the recent decision of the European Union ministers to grant open access to publicly sponsored research which represents another step into the free accessibility of knowledge (
The results of the second part of the project (work package II and III) that investigates the implications of knowledge privatization for corporate productivity and industry concentration of R&D will also produce policy relevant results. Understanding the impact of patents on firm productivity and their innovativeness is essential as one of the main ideas behind the patent system is to spur innovation. From a competition policy effect, the effects of patents on R&D concentration are of high importance as concentration on the technology market might coincide with concentration on the product market with implications for consumers. The results of work package II and III would also advance academic knowledge in the area since little is known about the effects of the introduction of patents on the multiple different dimensions of economic activities.

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Life Sciences
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