The Role of Intellectual Property Rights in Information and Communication Technologies

C Niranjan Rao
JEL codes: 
Working Paper No. 61 September 2004

The paper starts by recapitulating the basic arguments provided by economic theory
to explain the existence of the patent system. The paper then concentrates on the
three important ICT industries viz., telecommunication equipment, computer hardware
and semiconductor industries. The issues covered in the discussion on these
industries are the technological characteristics; market structure and technology
transfer experiences of selected developing countries. Even though there are some
differences in these industries, what come out clearly are some similarities. These
similarities pertain to concentration by firm as well as country; rapid technological
changes; existence of scale economies; rising minimum efficient levels of production;
entry barriers to the industries both financial and technological etc. Bresnahan,
Stern and Trajtenbert [1997] show that in the computer PC market brand name and
being on technological frontier help the firm in appropriating inventions. Taylor and
Silberston [1973] observe that in electronics while patents by themselves are not
important method of appropriation, it encourages firms to accumulate patents so
that they can have an advantage in cross-licensing agreements. This finding was
reiterated by Hall and Ham [1999] for semiconductor industry. They name this phenomenon
patent portfolio race. The paper briefly touches upon the issues pertaining
to Internet and the problems it raises for copyright; protection of computer software
and the discussion on a sui generis protection for databases. The paper concludes
that the role of IPRs in ICT seems to be marginal and as prices are falling
it does not seem to be attracting negative attention.