Economics of Intellectual Property Rights

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Economics of Intellectual Property Rights

Microeconomics project

Indian Institute of Management Bangalore

PGSEM 2012

Submitted to Prof. A. Damodaran

Submitted by





Introduction 3

Intellectual property rights and monopoly 4

Approaches to Valuing IPR 4

Costs Approach 4

Productivity 5

Company Market Value 6

Costs of enforcing IPR 6

Adverse Selection 6

Litigation costs 7

Process of filing a patent with US Patent Office (USPTO) 8

References 9


World Intellectual Property Organization (WIPO) [1] defines “Intellectual property (IP)” as creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.

IP is divided into two categories:  Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs.  Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs. The innovations and creative expressions of indigenous and local communities are also IP, yet because they are “traditional” they may not be fully protected by existing IP systems.  Access to, and equitable benefit-sharing in, genetic resources also raise IP questions.

Following are the broad categories under Intellectual Property:

Patent: A patent is an exclusive right granted for an invention, which is a product or a process that provides a new way of doing something, or offers a new technical solution to a problem. A patent provides protection for the invention to the owner of the patent for a limited period, generally 20 years.