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In: Economics

Discuss the information economics perspective on intellectual property. What new insights or public policy implications arise?...

Discuss the information economics perspective on intellectual property. What new insights or public policy implications arise? How are they relevant to your home country?

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Expert Solution

Intellectual property has economic implications for the innovator since it is the new knowledge/new innovation which is obtained through huge cost of research and development and can demotivate the innovator if they cannot protect their innovation/intellectual property rights and can incur huge loss if same is accessed by other without any cost and freely since same invention can be multiplied by other when the related intellectual property/innovation/knowledge is easily available without any cost.

Issues with Innovation: Innovation creates monopoly and market power and power to influence market price, production and profitability since it restricts competition by restricting its use by others and it discourages competition during the period for which patent is granted. Since there is huge cost involved in developing new technology/product/process/knowledge through cost of research and development and due to this cost, innovator will want to recover this cost plus profit on top of above in order to be get motivated continuously for innovating further.

It restricts competition and access to general people who does not have the enough purchasing power to afford that product or service for the betterment and in that case sometimes governments pitch in through economic subsidies to innovator which is equal to their fixed cost of research and development for availability of information of innovation to others and use of it with some restrictions, i.e. patents, copyrights, etc. and if not anything but access to government of that technology in order to give license to any one entity other than innovator to produce and make that product or service available to the masses at affordable prices.

Intellectual property is very controversial around the world and is criticised for its monopoly power, non availability of product or services to poor, lower middle, middle classes of the citizen and more to create hurdles in its availability and also high price which is associated with high profit margin.

In case of India patents are granted under Patents Act, 1970 which was giving only process patents in comparison to product patents granted by the western countries, i.e. US. In process patent only the process cane be patented not the whole product and anybody can produce the same goods or service with changed process or new process and can apply for process patent but as per TRIPS(Trade Related Aspects of Intellectual Property Rights) product patent is allowed no matter with which process product is made, one cannot copy the product for certain period.

In 2005 India has amended its Patents Act, 1970 and started granted product patent in compliance of TRIPS agreement and now nobody can copy the product for the patent period of 20 years subject to some conditions in order to safeguard the interest and high cost of research and development of innovator but simultaneously can check on high prices charged by innovator and also monopoly situation created by the innovator.


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