Trade in Ideas Program: Start-up Phase

The 5th meeting of the informal team of the trade in ideas program took place today, October 30, at WTO.

The purpose of the program is to leverage the human capital formation of especially developing nations through markets in patents. The goal is to reduce risk and uncertainty in such markets for inventors so they can thrive. This is an institutional issue.

The purpose with the 5th meeting was to discuss the start-up phase following the successful completion the pilot-phase in January. This phase will establish the “infrastructure”: improving market efficiency, creating statistics on trade flows in ideas and performing field experiments to test out cross-border trade rules. Later stages will also include education programs of the next generation of managers.

Peru invited to the meeting and in an opening communication expressed confidence in the economic soundness of the program and especially stressed the focus on the facts based applied research approach of the program to better understanding the actual markets in cross-border patent licensing and transfers, the actors, and other issues. Peru also commented on the interdisciplinary nature of the program and the broad team that had been created across ministries and agencies to carry out the pilot-study and is now ready to carry out a planned workshop with the Pacific Alliance countries to do a “field experiment”. Cameroon, who joined the informal group on Oct 23, proposed to write a memorandum of understanding (MOU) between the countries interested in the program. The representative also pointed out that is was important to “be part of the solution”, not only wait for technology to come from abroad. Mexico, who was new to the team, will investigate how to involve the technical cooperation between the Pacific Alliance countries, and then consider possible further steps. The senior policy advisor from the ministry of trade in Kenya joined on-line and pointed at Kenya as a “hub for inventions” and continued dialogue with the program. The Dominican Republic stressed the cooperative nature of the program and how inventors could benefit from external partners, and much was to learn.

A second part involved funding strategies for the start-up phase, after Sweden’s funding of the pilot-phase has ended. Two main strategies were discussed: A regional approach, thus regional cooperation funding for regional field studies, and an “outreach group” to approach interested countries.

A follow-up meeting to move on particular projects and funding is planned for December 10, 2020.

The PPT from the meeting can be found here.

For further information on the program and interest to join the informal team please contact by mail at: eskil@ullberg.biz.

Economic efficiency of patent markets: SEP licenses under FRAND conditions

 

A long-standing principle of patent systems is that the patent holder can decide whom to license based on the field-of-use  and what to ask, creating a mechanism to price differentiate, that is, to charge different prices for the same patented technology, depending on the value of its use.

Such a mechanism allows the patented technology to be distributed (allocated) through markets to a maximum number of competing and non-competing users (firms), at prices based on the (risky and uncertain) value of their future use (in new innovations), adding to the revenues (and likely profits) of inventors.

We examine this principle by means of a literature review and discuss, both in a short-run static and a long-run dynamic setting, the economic efficiency of such price differentiation (price ‘discrimination’ in the economic literature) by field-of-use with respect to licensing contracts concerning patents essential to a standard,2 that is, Standard Essential Patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions.

Article ref.: Ullberg, 2019, Economic efficiency and field-of-use pricing of SEP licences under FRAND terms, Queen Mary Journal of Intellectual Property, Vol. 9 No. 4, pp. 392–413

DOI:https://doi.org/10.4337/qmjip.2019.04.02

Also available at: 4iP Council’s web page.

Abstract

This article is concerned with the producer market in patented technology, and whether price differentiation based on field-of-use – a common strategy adopted by businesses with high fixed costs – is economically efficient. The focus is on the licensing of Standard Essential Patents (SEPs) on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions, including also the Internet of Things (IoT) applications, and the economic growth in the digital economy, especially for small and medium sized enterprises (SMEs). The central argument proposed is that the absolute difference in the value between usages of essential standardized technologies determines whether a single price for all usages or specific field-of-use prices are economically efficient. A small difference in value should result in a single price and a large difference in different prices. Pricing policy is critical to create a world-wide sustained technology development including contributions from, and applications for, emerging markets and developed markets, thereby growing the digital economy.

In this literature review, three evaluation angles of the literature are used: a market analysis under neo-classical assumptions of price-taking agents and marginal (incremental) value; an expanded market analysis where the willingness to pay (WTP) replaces marginal cost as criteria for what price should be paid for licences; and an analysis of market designs with similar characteristics as the SEP market in terms of risk, using experimental economics (behavioural) and auction theory. All analyses angles investigate the principle of field-of-use licensing, established already in the first known patent law in 1474.

First Trade in Ideas Training Workshop in cooperation with the WTO Chair Program

The first traded in ideas training workshop was carried out through the WTO Chair Program in 2019. Please find short summary from the WTO webpage or here.

“A training workshop on trade in ideas was organized by the Oman WTO Chair in collaboration with the Innovation and Technology Transfer Center of Sultan Qaboos University (SQU). The workshop was organized from April 7- 11, 2019 and was delivered by Dr Eskil Ulberg, senior research scholar IMIT and adjunct professor at George Mason University. The objective of the workshop was to introduce the theory of the patent system as a trade system, as well as the practice of how the patent licensing really works. The workshop was attended by 25 participants including PhD and MSc students, university professionals, ministries professionals, researchers from The Research Council (TRC) and innovation stakeholders from various organizations in Oman. At the end of the Workshop, a meeting was held with the University Deputy Vice Chancellor for Postgraduate Studies and Research on further expansion of the trade in ideas programme with SQU.”

A PM from the workshop can be downloaded here.

The class of the Trade in Ideas Program.

Meeting with The National Research Council.

Presentation at WTO of Trade in Ideas Pilot-study: Next Steps

What is the economic potential of trade in ideas?

Chile, El Salvador, Peru, Kenya, Azerbaijan, South Africa and Uganda are participating in a forward-looking study to inform a new economic development policy based on leveraging the human capital formation of developing nations through markets in patents (licensing). A first pilot-study consisting of surveys of inventors on cross-border licensing practices and prices and video-workshops with inventors and policy makers from these countries were reported on Nov 26. The event was organised by WTO with introduction by Deputy Director General Mr. Yi and moderated by Mr. Koopman, chief economist at WTO.

 

The next steps to inform a national and international policy discussion were presented, including an already started statistics framework study – a key to measure the impact of such a policy.

A key initiative is to create a LDC package with the least developed countries (47 in 2018), providing everything needed to being licensing of their patented technology to the world, leveraging their human capital formation. Some of these inventor-companies may have the potential to become “economic locomotives” for these countries, creating opportunities for their nations.

The Foreign Office of the Kingdom of Sweden funded the pilot and the statistics study.

A recording of the presentation and discussion as well at PPT and communications by four participating countries can be found here, introduction here and powerpoint here.

Sincerely,

Eskil Ullberg

 

Documents from presentation and full program:
– Introduction: text
– Web-cast presentation: watch recording here. 
– Powerpoint: Presentation

WTO Working Group on Trade and Transfer of Technology

On October 26, 10-12, a presentation of the Trade in Ideas Program took place at the WTO for the Working Group on Trade and Transfer of Technology (WGTTT). El Salvador, a participant in the Trade in Ideas Pilot-study, had asked the EC, through Sweden, the funder of the pilot-study, to give an overview of the principle and program in eluding some early results.

If any additional information about the program is desired, please email: eskil@ullberg.biz

Enclosed is the powerpoint from the meeting. See: Powerpoint for WGTTT, 2018-06-27

WGTTT: https://www.wto.org/english/tratop_e/devel_e/dev_wkgp_trade_transfer_technology_e.htm

ABC RN (Australia) Interview on “A Global Patent Market”

ABC RN in Australia interviewed on “A Global Patent Market” as a consequence of the Op-Ed together with Edmund Phelps, Columbia.

Should there be a global patent market?

A new report argues that now ‘more than ever the world needs a framework of trade rules to facilitate the exchange of ideas across borders.

Eskil Ullberg is the co-author of that report and he believes that a cross -border technology exchange based on patent protection and enforcement mechanisms could release the creativity of both developed and developing countries.

So what would have to happen for this to work and does the WTO agree?

Hear interview can be listened to here.

 

Re-publ.: The world is turning its back on the inventor. This is what needs to change

Re-published op-ed with the World Economic Forum.

The world is turning its back on the inventor. This is what needs to change

The Need for a Global Patent Market*

The Need for a Global Patent Market

Opinion editorial

“The Need for a Global Market in Patents” by Edmund Phelps and Eskil Ullberg in Project Syndicate

Trade in Ideas Program Presentation and Discussion at WTO

On Feb 26, 20+ developing and developed countries joined a presentation and discussion of the new Trade in Ideas Program. The program aims at facilitating trade in ideas – based on markets in patent – between “North” and “South” as a new development policy.

Understanding the forces that are at play in such trade is the purpose, in order to inform economic policy, in particular for developing countries. Such policy will then leverage the human capital formation taking place at a breathtaking speed in many developing countries, through markets in patents.

After a presentation of the concept, a discussion was held with the countries present to get a sense of what key issues are today. These issues will be put into the program, by theme. A first follow-on project was announced: Trade in Ideas Statistics Framework planned for 2018.

The event was held at WTO with invitation by Sweden, who also is funding the pilot-study and plan to fund the first follow-on study to the pilot-study reported in another blog entry.

Presentation from event can be found here: WTO Lunch Presentation of Program.

A link to SwedenGeneva and Twitter @SwedenGeneva (March 1).

Please feel free to follow Twitter @EskilUllberg, for updates and news on this program!