The Law and Economics of Innovation

Legal Studies 146

Lecture MW 4-530P, 155 Kroeber.

Section Meetings, Tuesday 2-3p or 4-5p, 115 Kroeber

Suzanne Scotchmer, Professor

Silvana Quintanilla, GSI                                                    

Prerequisities: Econ 1 (or a course in microeconomics).


Main text: Innovation and Incentives, MIT Press, 2004 (also available in Japanese and Chinese)


Course requirements: Attendance and participation (10%). (We will take attendance.) Book report (30%, due Nov 23 midnight) and final exam (60%, exam group 13, Dec 15, 8-11am). The exam will be based on weekly review questions, which will be linked to the syllabus on Thursday mornings, and discussed in section meetings the following week.


Description: The course discusses how the creation of knowledge and artistic, literary and musical works are supported in a competitive economy, especially in the digital age. This includes a discussion of intellectual property, broadly construed as patents, copyrights, trade secrets, trade marks and geographic indications, in historical and institutional context, recognizing that intellectual property is only one way to reward authors and other creators. We also consider public funding in its many guises, and why (or if) there should be public sector funding in parallel to, or instead of, private mechanisms of reward. We will also consider the problems of competition that arise in the digital economy, especially where firms must choose between sharing common standards for delivering content or developing proprietary standards, and whether legal rules should govern these choices. We will discuss some major competition issues that have arisen in the digital economy, such as Google Books, the Microsoft antitrust cases, and the competitiveness of search advertising when there is a dominant search provider such as Google.







Other reading and lectures.

If required, there is a star.





Week 1

Aug 29

Sept 1

Institutions for Innovation: A Brief History

Ch 1

Review Questions

*The Case of Japan (R. Aoki)

Week 2,3

Sept 5,7

Sept 12,14

Investing in Knowledge

Ch 2

Review Questions

*Prizes for science

Week 4

Sept 19,21

IP Law basics

Ch 3

Review Questions

Patent Reform Act 2011

* E.A. Crowne Pounds of Flesh, the Merchants of Parma and Ham-Lets

*International Herald Tribune on Google's Belgian news wars

USPTO guidance on mathematical algorithms

Gottschalk v. Benson (supreme court on algorithms)

Week 5

Sept 26,28

Design of IP: length and breadth

The $800m pill

Ch 4

Review Questions

*McDonalds Patent Application on how to make a sandwich and a plant patent

*In re Bilski

Genentech and the Stolen Gene, Innovaro

Week 6/7

Oct 3,5

Oct 10,12

Cumulativeness in Research

Ch 5

Review Questions

*Spitting Image (Inkjet Printer), Sept 19, 2001, The Economist

*Invention of Email, Pretext Magazine 1998.

 *Neem Tree

Insulin Gene Wars

Week 8

Oct 17,19

Antitrust and Licensing

Ch 6

Review Questions

*U.S. v. U.S. Gypsum (factual summary)

Week 9

Oct 24,26

Open Source as an Incentive Mechanism


*Maurer, Sali & Rai. 2004 Finding Cures for Tropical Disease: Is Open Source the Answer?, Public Library of Science: Medicine 1:56-58.

*Lerner and Tirole, Economics of Technology sharing: Open Source and Beyond

Week 10+

Oct 31

Nov 2

Nov 7


 Ch 7

Review Questions

*Business Software Alliance piracy study (trade organization)

*the Selden automobile patent

*Oracle v SAP complaint (to page 7)

*Wall Street Journal article on Oracle judgment

Week 11+

Nov 9

Nov 14, 16

Role of the Public Sector

Ch 8

Review Questions

*Profits and the university: the case of Ignacio Chapela

from Counterpunch, 2004

Ignacio Chapela and Mexican maize


*Gerth and Solberg, Drug Makers Reap Profits on Tax-Backed Research NYT April 2003

Should universities accept tobacco money?

Week 13+

Nov 21,28 not 23

Network effects

Ch 10 

Review Questions

Metcalf's Law

* In praise of third place, Surowiecki

Katz and Shapiro

Week 14

Nov 30

Innovation in the global economy

Ch 11

Review Questions

Nature July 15, 2004. Scientific Impact of Nations

*Malaria Drug Artemisinin YouYou article, Science article

*Klaus Eichmann, Koehler’s Invention, Ch. 8 (on the patenting of monoclonal antibodies)