synthèse TIE

Why innovation matters ?

Innovation, defined as a new combination of resources, is important because it is the primary source of welfare improvement

How Joseph Schumpeter defined innovation ?

defined innnovation as a new combination of resources

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* new good
* new method of production, new organizations
* new market
* new source of supply of raw materials
* reorganization of any industry

What are the phenomena of technological progress ?

* economic
* social
* societal acceptance

What is the role of societal acceptance in the success of new technologies, considering that technological progress is not solely an economic phenomenon?

it is crucial because if the society is not receptive to them new technologies may fail

What is inertia and how it impact progress of new technologies ?

* outcome of rational behavior or natural in complex systems may explain why some societies are resistant to change

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* developping countries may struggle to import new technologies due to their cost and complexity

What are some non-market mechanisms and political activism strategies that can lead to resistance against new technologies?

* regulating or licensing agencies
* lobbying

In what ways can democratic processes sometimes diverge from maximizing the long-term economic welfare of economies when it comes to adopting new technologies?

uncontrolled market decisions can create income distribution gaps

How can resistance to new technologies occur ?

* non-market mechanism
* political activism
* democratic process
* cultural
* religious factors

What determines the decision rule for adopting new technologies ?

determined by the political rule of the game

What affects the decision rule ?

* political struggles
* social struggles

Why do non-market criteria and political lobbying tend to become prevalent in the decision-making process for major technical choices ?

* because there is a high level of uncertainty and emotional appeal

How can an anti-technological and conservative bias occur ?

* built into the aggregator
* sustained through education practices

alpha = 1

The pure market outcome would occur

beta = 1

a pure dictatorship could occur

What does society determine before deciding whether to adopt a technology?

1. the political rule
2. sets alpha and beta
3. determines if technology addopted or not

What are the potential consequences of overregulation in the drug industry?

can lead to the rejection or delay of useful drugs, contribute to high costs and prices.

What are the potential consequences of under-regulation in the drug industry?

can result in the approval of unsafe drugs and free marketing practices.

What does the case of Bush and the stem cells' veto highlight?

highlights the political struggle over regulation and its impact on scientific research.

What were the effects of the Deregulation Act of 1978 on the aerospace industry?

removed government control and opened the aerospace industry to market forces. This led to bankruptcies for some incumbents but also resulted in a drop in prices for passengers and the emergence of new concepts like supersonic airliners.

What is the desired objective when seeking a balance in regulation?

is to have rules in place that protect consumers and promote innovation, without becoming a barrier to progress or an opportunity for lobbying groups to push their agendas.

What was the problem with supersonic transport ?

* too early, expensive, challenging, not economical and environment friendly
* political airplane
* US regulation killed the market

Why mass transportation airplane won ?

* “just in time”
* cheap to operate
* surge of mass transportation

Why STI policies ?

to reduce “market failures”

* imperfect appropriability
* uncertainty

What are the reasons for government intervention in promoting scientific and technological progress?

Social return to R&D (60%) > Private return to R&D (15%)

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* contributing to basic knowledge and welfare
* promote scientific and technological progress, which has a positive impact on society
* achieve social goals such as defense, health, space exploration, and environmental protection.

What are some policy instruments that the government can use to promote innovation and R&D activities?

* fiscal measures
* grants and loans
* specific targets/mission-oriented policies
* public research
* intellectual property rights
* regulation
* prizes

How does public funding of business R&D, through subsidies, procurements, tax incentives, and prizes, benefit companies?

* money
* reduces costs

What is the role of intellectual property in promoting innovation?

* gives incentives
* shares knowledge

What is the concept of "effet d'aubaine" referring to in the context of incentives for R&D?

refers to the phenomenon where incentives may reward R&D expenditure that would have occurred even without the incentive, essentially resulting in a subsidy.

What are some challenges faced by governments in relation to incentives for R&D?

* Governments may find it difficult to predict the total loss of tax revenue and the overall impact of these incentives.
* tax incentives may be less effective in supporting specific governmental priorities compared to other policy tools like subsidies.

What are the caracteristics of R&D subsidies ?

* more targeted
* better bugdet control for government

What are the caracteristics of fiscal incentives ?

* more neutral
* more accessible
* more predictable for companies

What are Tax credits (R&D exp. ) ?

* **Tax credit decreases the corporate income tax rate a firm has to pay.**
* **Rate can be applied to either corporate tax, payroll tax paid for R&D workers or personel income (for self-employed).**

What are Enhanced allowances (R&D exp.)?

* decreases the base amount that is taxed by allowing to ‘inflate’ the R&D expenditure base.

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Example: if R&D expenditure is € 100 and the rate of enhanced allowance 1.5 then the total R&D expenditure will be ‘increased’ to € 150. This will decrease the base of taxable income.

What is Accelerated depreciation (R&D exp.)?

* permits to depreciate the purchased fixed assets at higher rates in the first years of the asset’s life.
* This allows to decrease the overall taxable income in the specific perions

What is Reduced corporte tax rate (IP income) ?

* Reduced corporate tax rate on intellectual property income (“IP Box” or “patent box” or “innovation box”) is an outcome-related incentive.
* reduces the corporate income tax that firms pay on commercialization of innovative products that are protected by intellectual property (IP) rights.

What are some common eligible expenses covered by tax incentives for R&D?

* wages
* consumables
* contract research.

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exceptions

* outsourcing R&D to universities
* incentives based solely on wages.

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How are small and medium-sized enterprises (SMEs) without profits accommodated in terms of R&D tax incentives?

* carry-forward or carry-back of the credit
* cash refunds
* transferable credit with the Treasury or as a guarantee.

What are the issues of tax incentives?

* “effet d’aubaine”
* design
* timing of claiming the credit

What are patent boxes?

refer to tax incentives that provide reduced tax rates on gross or net income generated from patents, trademarks, and other forms of intellectual property (IP).

What are some issues to consider when designing incentives for intellectual property (IP)?

* determining which types of IP are covered by the incentives
* whether purchased or pre-existing IP is eligible
* companies moving to lower tax jurisdictions

What is the European Union currently working on regarding tax incentives for R&D and intellectual property?

The European Union is working on a proposal for a common tax base in Europe that includes a super deduction of 150 percent, aiming to replace patent boxes and other R&D tax credit schemes.

What is the primary factor that determines the effectiveness of these policy instruments?

depends on the initial Corporate Income Tax Rate (CITR).

What is the purpose of the Partial Withholding Tax Exemption for Researchers and how does it reduce R&D costs?

* aims to provide withholding tax exemption for companies that employ researchers working in R&D. This exemption applies to individuals with doctoral or master's degrees, as well as to Young Innovative Companies (YICs).
* when executing R&D activities.

What are Innovation Premiums?

refer to the exemption from personal income tax and social security contributions for both employees and employers when implementing creative ideas related to products, services, working processes, and more.

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limit : one month's gross salary per worker per calendar year.

What is the purpose of the Expatriate Tax Status?

aims to provide tax benefits for foreign researchers temporarily in Belgium who are detached or recruited on their own payroll. It includes tax-free expatriation allowances, reimbursements of non-repetitive expenses, and reduction of employment costs for employers.

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limit : 29,750 euros per year.

What is the R&D Tax Credit on Investments?

is a tax incentive that reduces the tax payable spread over the depreciation period of the asset used for R&D. This incentive applies to the development of new products and advanced technologies that are environmentally friendly.

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If the tax credit cannot be fully offset against the tax payable, it will be reimbursed after 5 years.

Investment Deduction for Patents and Licenses

Deduction from taxable income of 13.5% of the investment value of patents (acquired or self-developed) and the acquisition value of individualized licenses

Why should businesses be aware of megatrends and integrate broad policy changes in their strategies?

to adapt to changing societal and environmental landscapes. By aligning their strategies with emerging trends and policy shifts, businesses can position themselves for long-term success and sustainability.

Ex.:IKEA, sweetgreen, and Honest Tea

What factors should businesses consider when determining profit sharing?

should consider appropriability and complementary assets.

Why should businesses take into account externalities and spillovers?

can better understand and manage the broader consequences of their operations

What is appropriability?

Appropriability focuses more narrowly on the nature of the technology and the available legal mechanisms to protect an innovator. It explicitly deals with firm strategy and organization as a means to appropriate value from innovation.

weak appropriability and complementary assets freely available

* low returns
* slow private investments

weak appropriability and complementary assets scarce and important

* returns to holder of complementary asset

strong appropriability and complementary assets freely available

returns to innovator

strong appropriability and complementary assets scarce and important

returns split

What is good ownership of innovation?

Good ownership of the innovation (patents, trade secrets, etc.) allows the innovator time to identify the dominant design and access complementary assets

What are Generic Assets?

* Contracts
* outsourcing

To what are exposed Specialized or Co-specialized Assets?

to hazards; integration is an option

Integration vs. Contract Strategies

Integration is recommended if there is weak appropriability and a need for specialized complementary assets. A fine competitor analysis is necessary

Explain to me Madonna’s case

The deal between Madonna and Live Nation highlights the importance of a tight appropriability regime, which involves protecting intellectual property and having a good understanding of the market.

What is the earliest known patent?

1469 : German print master received the exclusive right to print for 5 years

Why IP rights ?

* the natural law theory
* the reward theory
* the incentive theory
* the contract or disclosure theory

What is the natural law theory ?

inventors, similar to authors, are morally entitled to ownership of their intellectual property. It is based on the assumption that individuals have a natural property right in their ideas, which should be respected by others.

What is the reward theory?

society has an obligation, based on principles of equity, to reward inventors for their contributions to scientific progress. (ex.: giving them exclusive rights)

What is the incentive theory?

assumes that individuals and firms are more inclined to invest resources in scientific research when they are guaranteed exclusive rights to exploit their inventions.

What is the contract or disclosure theory

Encourage the inventor to disclose new technical ideas

Utility models (petty patents)

* Short-term patents with low inventive step
* Inventions that are new, useful, and non-obvious

Design patents

* Patents that protect the aesthetic appearance of a product
* Designs that are new and non-obvious

Plant variety protection (PVP)

* Protection of new varieties of plants
* Novel and distinct plant varieties

Chip protection rights

* Protection of semiconductor integrated circuits
* Original semiconductor integrated circuits

Copyrights

* Protection of creative works
* Expressions of ideas, such as books, music, and software

Trademarks

* Protection of distinctive signs used in commerce
* Names, logos, and other marks that distinguish goods or services

Trade secrets

* Confidential information that provides a competitive advantage
* Proprietary information that is not publicly disclosed

Franchise

* Agreement that allows a franchisee to use a franchisor's business model
* Business models, trademarks, and other proprietary information

NDA (meet VCs, BAs)

* Non-disclosure agreements that protect confidential information in business transactions
* Confidential business information

NCA (employers, risky…)

* Non-compete agreements that prohibit an employee from working for a competitor
* Employment restrictions to protect trade secrets

Database protection

* Protection of databases against unauthorized extraction or use
* Original databases

Controlled Geographical origin (AOC)

* Protection of agricultural products from a specific region
* Agricultural products with a specific origin and quality

Labour contracts

* Legal agreements that govern the employer-employee relationship
* Terms and conditions of employment

Explain coca-cola “hobble skirt”

Coca-cola bottle shape became so known that it became synonymous with coca-cola so they obtained a federal trademark

Explain the Sonny Bono Act of 1999

* after intense lobbying from Walt Disney extended copiright termsin in US by 20 years
* author’s copyrights : before would last 50 years after death now 70 years
* corporate authorship : will last 70 to 95 years after death
* without this Mickey Mouse would have been in the public domein

Only two Coca-Cola executives know Coke's formula, and each of them knows only half of it.

False

Coca-Cola does limit access to the formula to two executives, but each knows how to formulate the syrup independently.

True

How does rumors on coca-cola affected them?

enhance consumers perception of specialness of Coca-cola

Franchise usually are…

* Easy to duplicate and operate
* Have detailed systems, processes and procedures
* Have a broad geographic appeal

Why Plant Variety Protection?

* before not considered inventive and difficult to describe breeding process
* need PVP to stimulate invention
* advencment in biotechnology
* PVP > plant breeder’s right

What is a breeder?

the person who bred, or discovered and developped a variety

EPC caracteristics

* expensive and uncertain in validity

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exception

* exemption for reaserch use but varies accross countries
* farmers rights

CPOV caracteristics

* cheaper and relatively stable in validity

exception

* breeders exemption
* farmers rights

What is the reason behind the French government's decision to ban the use of "meat" terms for vegetable-based products?

* to prevent misleading consumers
* in line with European Court Justice : plant-based food cannot be sold as milk, butter and cheese
* exception : coconut milk, almond milk and peanut butter

Differences between EU and US patent system

* common law vs civil law
* smaller fees (EU)

What are THE SEVEN DEADLY SINS OF EUROPE’S FRAGMENTED PATENT SYSTEM?

* affordability
* low quality : NPOs grant patents independently of EPO, inducing heterogenous quality standards
* complexity
* uncertainty
* lack of coherence
* no coordination at EU level
* weakness in global negotiations

What is Jaffe and Lerner's hypothesis regarding the US patent system and its potential vicious cycle?

* low-quality patent examination leads to an increase in the filing of lower quality patents.
* This influx of low-quality patents further overwhelms the examiners, resulting in a decrease in examination quality.
* The authors question whether the concept of "quality" can explain the structural differences observed in the patent system and propose that patent fees may play a role in this cycle.
* They also suggest that the heterogeneous rigor of the patent examination process could stem from different designs, which are ultimately influenced by policymakers such as lawyers, patent office officials, and policymakers themselves.

Explain me the case of Blackberry and NTP

* about wireless communication in email systems

NTP filled a lawsuit against BlackBerry because they patented this system

What is the troll strategy ?

companies that hold a portfolio of patents solely for licensing and enforcing purposes without any manufacturing or research base

What are the troll’s tactics

* submarine patents
* US continuations and EU divisionals to not undergo rigorous examination
* purchase patents from firms in financial troubles

What is the cameleon strategy?

adapting a patent to third parties’ products

What are the strigency and grant rate of EPO, UPSTO and JPO

EPO : highest, lowest

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UPSTO : moderate, highest

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JPO : intermediate, intermediate (closer to EPO)

What are the advantages of patents for firms?

* Powerful device to protect market shares
* Fully part of a corporate strategy
* Source of knowledge
* The core of the knowledge economy

What are the disadvantages of patents for firms?

Huge financial risks from litigation (e.g. RiM)