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Intellectual Property and Innovation Protection by Rémi Lallement

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3How Effective is the System in Terms of Social Welfare? The Dimensions of the Problem

If we move from the microeconomic dimension to a more aggregate level – especially sectors or countries – the analysis of the incentivizing effects of intellectual property tools cannot remain limited to the point of view of the individual entitled party. It must also integrate the resulting effects on third parties. This second type of effect is a priori significantly less positive. Taking into consideration that the value of an intellectual property right is based on its ability to exclude, the assertion of this exclusive right runs the risk of imposing substantial costs on third parties. Consequently, the issue is to know how and to what extent we can minimize these costs and then maximize the global effect of intellectual property on a societal level.

3.1. Intellectual property rights as a second-best solution

In relation to intellectual property rights, and patents in particular, there is a certain tension between a logic of reservation through the conferment of temporary monopoly rights aiming to drive innovation and, on the other hand, the need for arrangements focused on promoting the dissemination of knowledge and leading to new possibilities for competitors to enter the market.

3.1.1. A blend of dynamic efficiency and static inefficiency

These rights combine elements of dynamic efficiency and static inefficiency [NOR 69]. On one hand, they are socially desirable and advantageous ...

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