Daniel Spulber Provides Insights into the Value of Patents

By TAP Staff Blogger

Posted on May 13, 2016


Two papers by Professor Daniel Spulber look at the interplay of the economic benefit of patents and the public policies that impact the development of innovation.


In “How Patents Provide the Foundation of the Market for Inventions,” Professor Spulber considers how the economic benefits of the markets for innovation and inventions should guide development of intellectual property policy.


Abstract: How Patents Provide the Foundation of the Market for Inventions
(Journal of Competition Law and Economics. 11(2): pp. 271-316)

The article develops a comprehensive framework demonstrating how patents provide the foundation of the market for inventions. Patents support the establishment of the market in several key ways. First, patents provide a system of intellectual property (IP) rights that increases transaction efficiencies and stimulates competition by offering exclusion, transferability, disclosure, certification, standardization, and divisibility. Second, patent transfers constitute what the article terms “the market for innovative control” that provides incentives for efficient investment in invention, innovation, and complementary assets. Third, patents as intangible real assets promote the financing of invention and innovation. The market foundation role of patents refutes the economically incorrect “rewards” view of patents. The discussion considers how economic benefits of the market for inventions should guide IP policy and antitrust policy.


In “Public Prizes versus Market Prices: Should Contests Replace Patents?” Professor Spulber examines how antitrust and public policy towards patents should take into account the economic benefits of the market for inventions.


Abstract: Public Prizes versus Market Prices: Should Contests Replace Patents?
(Journal of the Patent and Trademark Office Society. 97(4): pp. 690-735)

Should contests replace patents? With public contests, government agencies would design games, choose prizes, select winning inventions, take ownership of technologies, and allocate technologies to producers. This contrasts with the existing patent system in which the market for inventions determines prices, allocates technologies, and guides invention and innovation. To address this critical policy question, I show that arguments demonstrating advantages of public prizes over market prices are fundamentally flawed. I further demonstrate that market prices dominate public prizes in terms of both allocative and dynamic economic efficiency. I argue that replacing patents with contests would damage invention, innovation, social welfare, and economic growth.


Daniel F. Spulber is the Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy at the Kellogg School of Management, Northwestern University, where he has taught since 1990. He is also Professor of Law (Courtesy) at the Northwestern University Law School. Additionally, Professor Spulber is the Research Director for the Searle Center on Law, Regulation and Economic Growth.


His research areas include entrepreneurship, management strategy, international business, industrial organization, regulated industries (energy, telecommunications, transportation), and law and economics.