A reappraisal of the Arrovian postulate and the intellectual property regime: user-specific patents

Recent advances in the economics of knowledge are raising questions related to the current intellectual property regime. This paper discusses the foundations of the appropriability trade-off, highlights the crucial distinction between inter- and intra-industry spillovers, and advocates the introduction of patents based on a combination of property and liability rules. These two-layered patents would include: i) exclusive protection which applies the property rule to intra-industry spillovers: Rivals and competitors in the same product market would be unable to use proprietary patented knowledge without authorization from the patent holder which had exclusive intellectual property rights on its knowledge, and ii) non-exclusive patents characterized by compulsory licensing which applies the liability rule to inter-industry spillovers. Prospective users of proprietary knowledge to generate new knowledge for innovation in other product markets, can access proprietary knowledge, for a royalty fee charged by the patent holder.