The Role of Intellectual Property in Joint Innovation and Development

Abstract

This paper focuses on the role of intellectual property (IP) in structuring and governing innovative ventures between independent firms. The issue is particularly important given the tendency towards vertical disintegration in business firms whereby once integrated firms focus on core activities, while devolving residual aspects to independent suppliers and collaborators. In a world of fast changing technology, this also means that innovation takes place across firm boundaries and raises issues about the ownership of resulting intellectual property. This paper examines the routes available to firms for allocating such intellectual property to suggest that neither the default rules of US patent law, nor the types of agreements firms have struck as between each other provide adequate protections from appropriation while at the same encouraging seamless cooperation and sharing. This would suggest some caution about the appropriateness of the IP regime for the current innovation environment even in industries such as the pharmaceutical industry where patents are thought to be appropriate to recoup R&D investments and where the risk of standard patent hold up is thought to be low.