The Optimal Level of Intellectual Property Protection in Presence of Network Effects

With the progress of technology, intellectual property protection has evolved from a pure public policy to a combination of technical means and policy measures. The existence of network effects makes the issue even more complicated. Through mathematical and analytical tools, this paper seeks to analyze the optimal level of intellectual property protection in presence of network effects. Overall, it addresses two questions. What is the optimal technical protection level of an individual firm who maximizes its profit? What is the socially optimal protection level from the perspective of policymakers, who shoulder the obligations of stimulating innovation and technological progress? It is found that the optimal level is affected by a variety of factors and cannot be simplified as "the strong, the better".