Innovation, Technology Transfer and the International Regulation of Patents and Trade Secrets

By Michael A. KLEIN, Yibai YANG
Published in Journal of Economic Behavior & Organization

Abstract:

We develop a North-South endogenous growth model in which innovative Northern firms choose a patent, secrecy mix to protect against imitation by Southern firms. Southern imitators always have access to publicly disclosed patented information, but gain access to secret information only when an innovator transfers production to the South. We identify conditions under which strengthening Southern patent protection reduces global innovation, technology transfer and Southern welfare by decreasing the relative profit associated with producing in the South. Our analysis suggests that treating intellectual property rights (IPRs) as a single entity obscures important differences in the economic implications of international standards in distinct forms of IPRs.