INTERNATIONAL STANDARDS FOR INTELLECTUAL PROPERTY PROTECTION AND RESEARCH-AND-DEVELOPMENT INCENTIVES

We examine the effect of alternative standards for intellectual property protection. Uniform protection, based on the GATT principle of non-discrimination, provides domestic and foreign firms with the same level of protection. Discriminatory protection, based on Section 337 of the U.S. trade laws, provides different levels of protection depending upon where the firm is located. We show that discriminatory protection may not increase (and may decrease) domestic R&D. The effect of asymmetric patent protection depends on whether the rivals have pre-existing products, on the costs of R&D, and on the value of the potential innovation.