Patent buyouts results in lost profits for the financing country in comparison to the rest of the world and are subject to political manipulation/controversy

In this paper, we depart from the focus on government-firm frictions and explore (previously unstudied) distributional implications of buyouts that emerge from their public good and public financing dimensions. First, placing knowledge in the public domain in a multi-country world where not all countries contribute equally to buyout financing will result in a loss of profits for the financing country and in positive externalities for the rest of the world. Second, because buyouts are publicly financed, they may engender domestic conflict over the desired extent of tax financing, and such conflict will be influential if the government cares not simply about total welfare but about the welfare of politically important groups. In contrast, intellectual property rights finance innovation through market sales of subsequent private goods, and therefore circumscribe the externality associated with publicly available knowledge as well as the need for public financing.