advantages to, taking the lead.Some technological breakthroughs, specifically inventions, can be patented. Then they cannot be legally imitated for two decades. The purpose of patents is, in fact, to reduce imitation and its negative effect on the incentive for engaging in R & D. Example: Polaroid’s patent of its instant camera enabled it to earn high economic profits for many years. When Kodak “cloned” the camera, Polaroid won a patent infringement lawsuit against its rival. Kodak not only had to stop producing its version of the camera but also had to buy back the Kodak instant cameras it had sold and pay millions of dollars of damages to Polaroid. COPYRIGHTS AND TRADEMARKSCopyrights protect publishers of books, computer software, movies, videos, and musical compositions from having their works copied. Trademarks give the original innovators of products the exclusive right to use a particular product name. By reducing the problem of direct copying, these legal protections increase the incentive for product innovation. They have been strengthened worldwide through recent international trade agreements. BRAND-NAME RECOGNITIONAlong with trademark protection, brand-name recognition may give the original innovator a major marketing advantage for years or even decades. Consumers often identify a new product with the firm first introducing and popularizing it in the mass market. Examples: Levi’s blue jeans, Kleenex soft tissues, Johnson and Johnson’s Band-Aids, Sony’s Walkman, and Kellogg’s Corn Flakes.TRADE SECRETSSome innovations involve trade secrets, without which competitors cannot imitate the product or process. Example: Coca-Cola has successfully kept its formula for Coke a secret from potential rivals. Many other firms have perfected special production techniques known only to them. In a related advantage, a firm’s head-start with a new product often allows it to achieve substantial...
