558
edits
Changes
Jump to navigation
Jump to search
**Patents on ‘valueless’ inventions will be sought. Suppose that a firm can build a component using public domain knowledge or pursue an almost identical method that embodies the tiniest and least useful of inventive steps but that could be patented. As the patent would qualify the firm for a tax deduction on some allocation of the product’s value, the firm should pursue the patent.[[Category:Innovation Policy]]
Feedback on the Innovation Promotion Act (view source)
Revision as of 12:20, 27 March 2017
, 12:20, 27 March 2017no edit summary
===Executive Summary===
*Section 936(h)(3)(B)(i) implicitly includes trade-secrets through ‘invention, formula, process, design, pattern, or know-how”. Providing incentives for firms to keep trade-secrets directly induces the market failures than much innovation policy is intended to mitigate. It also has an extensive moral hazard issue.
Question: To what extent should gross receipts from services that are directly related to a product that uses qualified property be included in the determination of qualified gross receipts?
*Weighting deductions by R&D expenditure disincentivizes the creation of a market for ideas, where many participants act as intermediaries.
Question: What would be the appropriate approach in determining the expenses properly allocable to innovation profits? Should the proposal just include authority for the Secretary to adopt allocation rules or is more specific guidance necessary?
*Allocating value efficiently to components of a multi-component product (‘other dispositions’) is, in general, an extremely difficult problem in economics.
**Suppose that two firm’s patents are used to make a product and that the patents are complementary: one alone would make a product with $10 value but together they make a product with $40 value. How do you allocate the $20 complementarity created between the two of them?
*Given information asymmetries between the firm and the tax collector, any allocation of value will lead to moral hazard.
**Patents on ‘valueless’ inventions will be sought. Suppose that a firm can build a component using public domain knowledge or pursue an almost identical method that embodies the tiniest and least useful of inventive steps but that could be patented. As the patent would qualify the firm for a tax deduction on some allocation of the product’s value, the firm should pursue the patent.
