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Patent Thickets: Strategic Patenting of Complex Technologies
Abstract
Patent race models assume that an innovator wins the only patent covering a product. But when technologies are complex, this property right is defective: ownership of a product’s technology is shared, not exclusive. In that case I show that if patent standards are low, firms build “thickets” of patents, especially incumbent firms in mature industries. When they assert these patents, innovators are forced to share rents under cross-licenses, making R&D incentives sub-optimal. On the other hand, when lead time advantages are significant and patent standards are high, firms pursue strategies of “mutual non-aggression.” Then R&D incentives are stronger, even optimal.
... Following an internal consultative process in early April 1996, the United States submitted to the other Quad countries a preliminary "landscape" list of products, which did not include references to the Harmonized System (HS) nomenclature. 38 Besides the technical difficulty behind identifying such broad categories of products, Japan and the United States were concerned at the time by what they considered a decision by the European Union to "reclassify" certain products (i.e. CD-ROMs and other optical reading devices that could be used as components of video equipment, computers with multimedia capability as television reception apparatus, and certain local area network (LAN) apparatus as telecommunication equipment), resulting in the application of higher duties. ...
... For example, the United States wanted information on the application of two specific standards, the European Union wished to better understand the conformity assessment procedures used by participants and Canada considered that certain import-licensing procedures could pose a problem. 38 Most participants believed that NTBs could reduce the benefits of the ITA through delays, additional paperwork and costs, as well as other administrative hurdles. ...
... In the 1970s and 1980s, rather than patenting all possible inventions, some companies consciously focused resources on seeking only those patents that provided the best opportunity for cross-licensing with competitors, thus providing an incentive to avoid or settle suits of alleged infringements. 38 Such a strategy of "mutual non-aggression" is further institutionalized in patent-pools, where technology owners pool the patents necessary for a particular technology (e.g. TV, DVD, MPEG, WiMAX, etc.) and provide cross-licences to all participants. ...
The Information Technology Agreement (ITA) was a landmark trade deal signed by 14 WTO members and states or separate customs territories in the process of acceding to the WTO in December 1996. Not only was it the first sectoral agreement to be successfully negotiated among developed and developing countries, but it was also the first one to fully liberalize trade in a specific sector (with an estimated worth of US$ 500 billion a year) after the Uruguay Round. This publication explores the manner in which the agreement was negotiated as well as its evolution during its first 15 years, including the discussions in the ITA Committee. Finally, it analyses the impact of the trade liberalization brought by the ITA.
... En los últimos años la evidencia empírica ha mostrado que la industria automotriz se ha consolidado como una de las ramas más dinámicas del sector industrial, En el ámbito internacional, su principal característica es una creciente complejidad vista a partir de la convergencia de dos sectores, a saber, la automotriz y la eléctrico/electrónico (Bauer, 2007;Coronado et al., 2009;Juliussen, E. y R. Robinson, 2010). En la actualidad los nuevos prototipos de automóviles son más sofisticados no sólo por el número de componentes, sino que además poseen funciones que requieren un mayor grado de conectividad, por ello, el software en la industria automotriz juega un papel fundamental (Broy, 2006;Berger, 2015), convirtiéndose en un sector muy dinámico al nivel que podría ser comparado con sectores que involucran tecnologías complejas como la de Smartphone, nanotecnología, semiconductores, entre otras (Hall y Ziedonis, 2007;Bessen, 2003). ...
... Es decir, los titulares tienen derecho de exclusión pero ninguno de ellos tiene derecho exclusivo de uso cuya consecuencia inmediata sería enfrentarse a procesos de negociación con los distintos titulares de las mismas, lo que resultaría un proceso lento y costoso (Heller, 1998). De acuerdo con la literatura especializada suele señalarse que este fenómeno en algunos casos involucra bienes complementarios 1 lo que implica que los titulares de patentes poseen poder de monopolio (Shapiro, 2001;Heller, 1998;Bessen, 2003). Si existen terceros interesados y no tienen el acceso a determinada tecnología se sumergen en una maraña de patentes que entre sus consecuencias inmediatas es la posibilidad de infringir la patente, lo cual se agudiza si en las tecnologías implicadas no existen límites claros (por ejemplo, un bien intangible), como se ha observado en el caso del software (Bessen, 2003, 2011y Ballardini, 2009). ...
... De acuerdo con la literatura especializada suele señalarse que este fenómeno en algunos casos involucra bienes complementarios 1 lo que implica que los titulares de patentes poseen poder de monopolio (Shapiro, 2001;Heller, 1998;Bessen, 2003). Si existen terceros interesados y no tienen el acceso a determinada tecnología se sumergen en una maraña de patentes que entre sus consecuencias inmediatas es la posibilidad de infringir la patente, lo cual se agudiza si en las tecnologías implicadas no existen límites claros (por ejemplo, un bien intangible), como se ha observado en el caso del software (Bessen, 2003, 2011y Ballardini, 2009). Lo que conlleva a los propietarios e inventores si no logran "atravesar la maraña" o falla el proceso de negociación entre los titulares (Heller, 1998), a la posibilidad de enfrentarse a litigios por violación de patentes. ...
En los últimos años la literatura especializada en el análisis de tecnologías denominadas complejas debido a su alto nivel de tecnificación, han establecido la presencia de al menos dos fenómenos denominados como Patent Thicket y el Problema de anticomunes; mediante una revisión de la evidencia empírica de litigios por infracción de patentes en la industria auto- motriz, establecemos de manera indirecta la presencia del primer fenómeno. Nuestros primeros hallazgos respaldan la hipótesis de que el incremento sustancial de litigios en este sector desde el 2005 estaría explicado por la complejidad del automóvil asociada a una mayor dependencia del software lo que implicaría una reconfiguración en las cadenas de valor. Por último, verificamos la hipótesis de Bessen la cual indica que las patentes de software son más propensas a litigios y mediante un análisis de redes sociales observamos la presencia
... When asserting such patents, innovators often find themselves compelled to share profits through cross-licenses, resulting in suboptimal research and development (R&D) incentives. In such scenarios, particularly when patent standards are low, firms tend to construct "patent thickets" (e.g., Bessen, 2003;Marco et al., 2019;Van Zeebroeck et al., 2009), a trend notably observed among incumbent firms in more mature industries. Conversely, when significant lead time advantages and/or high patent standards prevail, firms are more inclined to pursue strategies of mutual non-aggression. ...
... In addition to the pure number of new patents within the thicket, denoted as n, which implies various patent application and renewal fees, this variable also encompasses all policy characteristics affecting the patenting related costs-referred to as patenting standards. These standards, including non-obviousness, novelty, utility, subject matter, among others, may add R&D costs on a potential entrant trying to patent product b that would compete with the existing monopolist's product a (Bessen, 2003). ...
We develop a theoretical economic model that establishes the link between fragmented patenting systems in an industry already characterized as a monopoly resulting in continuous/steady monopolistic market structure. We demonstrated that preemptive patenting strategy, by using secondary patenting scheme, may lead to an increase in the number of patents without changing actual number of products on the market. Moreover, when such a strategy is employed by a monopoly, it only serves to sustain and further monopolistic and therefore socially suboptimal market structure. Institu-tional/legal framework must exist to promote this kind of socially suboptimal behavior and resulting outcomes.
... More than 370 years after the English parliament established the modern patent institution (Boldrin & Levine, 2010, p. 43), over half of the respondents still saw secrecy as an effective means of appropriating gains from an innovation. One of the reasons would probably be the existence of strategic patenting confirmed by many authors (Cockburn & MacGarvie, 2011), which is connected with the issue of patent aggregation and the increased role of nonpracticing entities (Nicholas, 2013), buildup of patent thickets (Bessen, 2003), and an increasing number of patent litigation cases (Graham & Vishnubhakat, 2013). ...
... Granting weak patents not justified by the applicant's novel invention induces significant social costs as it often leads to costly litigation, creates danger of patent hold-up, and motivates defensive patenting, thus creating a socially wasteful vicious circle of strategic patenting (Farrell & Shapiro, 2008) and a buildup of patent thickets with shared ownership of technologies (Bessen, 2003). von Graevenitz et al. (2013) confirm that growing technological complexity invokes an increase in firms' patenting activities. ...
... Segundo Bessen (2003), pools de patentes efetivamente não corrigem todos os problemas associados a "emaranhados de patentes" (patentthickets). O autor ressalta o problema de titulares externos ao pool possuírem patentes de tecnologias cobertas pelo pool: (2007), a ocorrência de problemas de hold-up relacionados à patente no estabelecimento de padrões não é apenas um problema privado aos participantes de uma indústria, mas também um problema de política pública, pois a jusante os consumidores são prejudicados quando royalties excessivos são repassados a eles. ...
... Rev . No entanto, segundo Bessen (2003),pools de patentes efetivamente não corrigem todos os problemas associados a "emaranhados de patentes" (patentthickets) uma vez que titulares externos ao pool podem possuir patentes que cobrem a tecnologia englobada pelo pool, conforme será abordado na seção 3.3.1.1.b. O parâmetro de análise proposto relacionado à concessão de patentes de baixa qualidade será abordado a seguir. ...
A colaboração privada viabilizada por pools de patentes pode trazer benefícios tais como a redução nos custos de transação, promoção da interoperabilidade entre produtos complementares e promoção de uma divisão eficiente de trabalho. No entanto, deixar que a formação de acordos de colaboração seja regida somente pelas forças do mercado privado pode acarretar em riscos para o interesse público uma vez que as empresas podem colaborar de uma forma anti-competitiva. Assim, pools de patentes podem servir como mecanismos de fixação de preços, erguer barreiras à entrada, atrelar o licenciamento de patentes não essenciais àquelas essenciais, encobrir patentes inválidas, dividir vendas em uma indústria bem como outras violações à legislação de defesa da concorrência. Tais riscos são intensificados quando pools são formados no contexto do estabelecimento de um padrão. São propostos parâmetros de análise de pools na legislação brasileira, evidenciando os tópicos envolvidos na ponderação entre as eficiências geradas e os efeitos prejudiciais à concorrência e, em última instância, ao interesse público.
... chemicals and pharmaceuticals). In studies of the software industry, patents were found to be rare (Mann and Sager, 2007) and weak (Bessen, 2003;Bessen and Hunt, 2007). Useche (2014) found that patenting is used strategically by software industry firms going public. ...
Research and development (R&D) investments and patents influence initial public offering (IPO) valuations. After Sarbanes‐Oxley (SOX) legislation was enacted in 2002, there was a shift from a display of ‘Effort’ to ‘Results’. SOX legislation made fundamental changes to corporate accounting practices and the process of going public. We investigated how the IPO market responded to SOX legislation. Compliance with SOX was disproportionately costly for small, research‐intensive firms. Using Signaling Theory, we focused on whether the existence of patents became a valuable signal for the effectiveness of research and development expenditures (R&D). Our findings indicated decreased importance of R&D expenditures (signaling ‘effort’ to innovate). We also found increased importance of patents (intermediate ‘results’ of R&D efforts) post‐ relative to pre‐SOX. We concluded that patent activity at least partially replaced and moderated R&D in its role as a value driver of IPOs in the post‐SOX environment.
... Furthermore, as patents are considered more important for exporters, ceteris paribus, improving the functioning of the patent system will smooth the progress of global value chains. However, scholars have documented that patents can also be used as an anti-competitive weapon to lock out would-be competitors from certain technological spaces (Bessen [2003]; Rubinfeld and Maness [2005]; von Graevenitz et al. [2013]; von Graevenitz et al. [2020]; among others). Scholars and policy analysts have given considerable space to designing a patent system that encourages innovation but minimizes this rent-seeking behavior (e.g., Merges [1999]; Scotchmer [2004]; Shapiro [2004]; Jaffe and Lerner [2007]). ...
The patent system underpins the business model of some of the fastest‐growing companies. Used appropriately, it should support frontier technologies and nurture new firms. Used perniciously, it can stifle innovation and protect established technological behemoths. We analyze patent examination decisions at the American, European, Japanese, Korean, and Chinese patent offices and find evidence that patent attorneys have a surprisingly significant role in the patent system. Our results suggest that some forces within the examination system maintain the uneven playing field by allocating monopoly rights to inventors with better access to influential attorneys, rather than leveling it by favoring inventors with better, nonobvious ideas. Attorney quality is most important, vis‐à‐vis invention quality, in less codified and more rapidly changing technology areas such as software and ICT.
... These options are important because they generate future projects and push a firm's technological frontier (Celik, Tian, and Wang, 2022). These options are also often protected by patents, whose legal boundaries may be quite uncertain (e.g., Bessen, 2003;Lemley and Shapiro, 2005;Bessen and Meurer, 2009;Morris, 2012). For firms attempting to commercialize patent-protected technology, uncertainty in patent rights represents potential costs associated with holdup, licensing, and litigation (Shapiro, 2001;Grimpe and Hussinger, 2014;Hylton, 2016). ...
The legal boundaries of patents are more uncertain than commonly assumed. This uncertainty can increase costs from holdup, licensing, and litigation, which decreases the estimated value of synergies arising from the acquisition of innovation. We find that this uncertainty is important for target selection. Firms are less likely to be acquired when their patents are in thickets that expose firms to more patent-right uncertainty. Conversely, firms are more likely to be acquired when their patents form thickets that shield firms from this uncertainty. Furthermore, these relations depend critically on the acquirer's or target's ability to impose costs on the other.
... Unlike discrete invention patents, complementary patents are used as a bargaining chip. Generally, complementary patents do not award a monopoly over a marketable invention; rather, they grant blocking rights over a jointly controlled technology (Bessen, 2004). This could explain why economists in the economic literature have noted different patenting strategies in technology fields such as ICT and software compared to other technologies (Cohen et al., 2000). ...
... Unlike discrete invention patents, complementary patents are used as a bargaining chip. Generally, complementary patents do not award a monopoly over a marketable invention; rather, they grant blocking rights over a jointly controlled technology (Bessen, 2004). This could explain why economists in the economic literature have noted different patenting strategies in technology fields such as ICT and software compared to other technologies (Cohen et al., 2000). ...
This study assesses the degree to which the social value of patents can be connected to the private value of patents across discrete and complex innovation. The underlying theory suggests that the social value of cumulative patents is less related to the private value of patents. We use the patents applied between 1995 to 2002 and granted on or before December 2018 from the Indian Patent Office (IPO). Here the patent renewal information is utilized as a proxy for the private value of the patent. We have used a variety of logit regression model for the impact assessment analysis. The results reveal that the technology classification (i.e., discrete versus complex innovations) plays an important role in patent value assessment, and some technologies are significantly different than the others even within the two broader classifications. Moreover, the non-resident patents in India are more likely to have a higher value than the resident patents. According to the conclusions of this study, only a few technologies from the discrete and complex innovation categories have some private value. There is no evidence that patent social value indicators are less useful in complicated technical classes than in discrete ones.
... Unlike discrete invention patents, complementary patents are used as a bargaining chip. Generally, complementary patents do not award a monopoly over a marketable invention; rather, they grant blocking rights over a jointly controlled technology (Bessen, 2004). This could explain why economists in the economic literature have noted different patenting strategies in technology fields such as ICT and software compared to other technologies (Cohen et al., 2000). ...
This study assesses the degree to which the social value of patents can be connected to the private value of patents across discrete and complex innovation. The underlying theory suggests that the social value of cumulative patents is less related to the private value of patents. We use the patents applied between 1995 and 2002 and granted on or before December 2018 from the Indian Patent Office (IPO). Here, the patent renewal information is utilised as a proxy for the private value of the patent. We have used a variety of logit regression model for the impact assessment analysis. The results reveal that the technology classification (i.e., discrete vs. complex innovations) plays an important role in patent value assessment, and some technologies are significantly different than the others even within the two broader classifications. Moreover, the non-resident patents in India are more likely to have a higher value than the resident patents. According to the conclusions of this study, only a few technologies from the discrete and complex innovation categories have some private value. There is no evidence that patent social value indicators are less useful in complicated technical classes than in discrete ones.
... The application of multilayer network methods opens the door to a menagerie of new analytical tools to develop more sophisticated and tailored metrics for studies of technical change and the nature of innovation systems. For example, the identification of patent thickets (Bessen, 2003;Shapiro, 2000) is often conducted through, or supported by, citation network analysis (Von Graevenitz et al., 2011;Yuan and Li, 2020;Zingg and Fischer, 2018). The multilayer framework may assist in these studiesthicket identification depends crucially on the citation context (blocking vs. non-blocking citations) and the jurisdiction (a thicket is necessarily a single-jurisdiction phenomenon). ...
The use of patent citation networks as research tools is becoming increasingly commonplace in the field of innovation studies. However, these networks rarely consider the contexts in which these citations are generated and are generally restricted to a single jurisdiction. Here, we propose and explore the use of a multilayer network framework that can naturally incorporate citation metadata and stretch across jurisdictions, allowing for a complete view of the global technological landscape that is accessible through patent data. Taking a conservative approach that links citation network layers through triadic patent families, we first observe that these layers contain complementary, rather than redundant, information about technological relationships. To probe the nature of this complementarity, we extract network communities from both the multilayer network and analogous single-layer networks, then directly compare their technological composition with established technological similarity networks. We find that while technologies are more splintered across communities in the multilayer case, the extracted communities match much more closely the established networks. We conclude that by capturing citation context, a multilayer representation of patent citation networks is, conceptually and empirically, better able to capture the significant nuance that exists in real technological relationships when compared to traditional, single-layer approaches. We suggest future avenues of research that take advantage of novel computational tools designed for use with multilayer networks.
... The application of multilayer network methods opens the door to a menagerie of new analytical tools to develop more sophisticated and tailored metrics for studies of technical change and the nature of innovation systems. For example, the identification of patent thickets (Shapiro, 2000, Bessen, 2003 is often conducted through, or supported by, citation network analysis (Von Graevenitz et al., 2011, Zingg and Fischer, 2018, Yuan and Li, 2020. The multilayer framework may assist in these studies -thicket identification depends crucially on the citation context (blocking vs. non-blocking citations) and the jurisdiction (a thicket is necessarily a single-jurisdiction phenomenon). ...
The use of patent citation networks as research tools is becoming increasingly commonplace in the field of innovation studies. However, these networks rarely consider the contexts in which these citations are generated and are generally restricted to a single jurisdiction. Here, we propose and explore the use of a multilayer network framework that can naturally incorporate citation metadata and stretch across jurisdictions, allowing for a complete view of the global technological landscape that is accessible through patent data. Taking a conservative approach that links citation network layers through triadic patent families, we first observe that these layers contain complementary, rather than redundant, information about technological relationships. To probe the nature of this complementarity, we extract network communities from both the multilayer network and analogous single-layer networks, then directly compare their technological composition with established technological similarity networks. We find that while technologies are more splintered across communities in the multilayer case, the extracted communities match much more closely the established networks. We conclude that by capturing citation context, a multilayer representation of patent citation networks is, conceptually and empirically, better able to capture the significant nuance that exists in real technological relationships when compared to traditional, single-layer approaches. We suggest future avenues of research that take advantage of novel computational tools designed for use with multilayer networks.
... Furthermore, patents are reported to provide weak incentives to innovate. Even among specialized software publishers using patents, Bessen (2003) finds they often use patents for strategic purposes rather than for the enforcement of IP rights. Hall and MacGarvie (2010) find no significant stock market valuation effects associated with patents for pure software firms. ...
It is yet unclear whether patents and copyright are effective at protecting digital innovations. In this paper, we investigate this question using novel product-level data on mobile apps, in which we relate the use of both patents and copyright to (i) revenue performance and (ii) IP licensing. We theorize that these relationships depend on differences in product-level characteristics and that apps differentiated by their design are more likely and effectively to be protected by patents; apps combining elements of differentiated content are more likely and effectively protected by copyright. Our results support these predictions that product characteristics shape the appropriate contingent use of patent and copyright protection in digital products. These patterns are especially relevant to industries where digital products combine elements of differentiated design and differentiated digital content.
... Where patent standards are not well defined, some observers (e.g. Bessen, 2003) have pointed to possible impediments to innovation: "patent thickets" could arise as a consequence of multiple patent claims pertaining to various aspects of a given technology, blocking further innovation in that technology. 12 Lessig (1999) has challenged the privatisation of the so-called "intellectual commons" and the expanded scope of patentable innovation in the United States that now includes such areas as Internet business methods. ...
This report considers developments in agricultural patents since 1990 and their economic implications. It first provides an overview of the international framework for intellectual property protection and of the general trends in the stringency of protection in OECD countries. It then presents developments in the number of patents originating from OECD and other countries that are granted in Europe and the United States, for all fields and for agriculture and food technologies. These illustrate the leading role played by OECD countries in the provision of successful applications, although non-OECD countries increased their share of the total between 1990 and 2010. Finally, econometric analysis is used to assess the relationships between patenting and selected indicators of innovation and economic performance. The results points to favourable economic developments associated with the patent reforms in the recent decades.
... As Walsh et al. (2003) explained, entities develop strategies to cope with probable patent holdup problems, and in doing so, they mitigate the detrimental impact on their innovation activities to some extent. Shapiro (2010) and Bessen (2003) suggested similarly when they argued that there are several options such as patent pooling or cross-licensing for resolving the probable patent holdup issue. By using the data on the U.S. semiconductor firms, Ziedonis (2004) showed that the firms may strategically file more patents to mitigate the probable patent holdup risk. ...
The growth of the market for patents has drawn the attention of innovation management scholars and policymakers, especially regarding the impact this market may have on innovation. One of their prominent questions is whether firms exploit the market for patents to obtain strategic benefits over their market rivals rather than compete through the acquisition of technologies, which may aggravate ex-post patent holdup and increase the cost of innovation. This study examines how a firm's acquisition of external patents affects its rival firms' innovation activity when a patent can be strategically utilized by the patent purchasing firm. Through our review of patent holdup literature and firms' strategic utilization of patents, we derive a hypothesis stating that a firm's patent purchase deters its rival firm's development of relevant technologies to that patent if the patent covers crucial technological input for its rival's market operation. Our analysis uses Nortel's patent auction in 2011 and finds supportive evidence for the stated hypothesis. This paper discusses the differences between the nature of the market for patents from the market for technology and how we must incorporate such differences to formulate better innovation policies.
... Geleneksel yaklaşımın aksine -Ar-Ge'den patente doğru ilişki -patentin Ar-Ge üzerinde yol açabileceği potansiyel etkileri açıklığa kavuşturan çalışmalar da vardır: Almeida & Teixeira, 2007;Bessen, 2004;Miller, Benjamin, & North, 2012;Shapiro, 2001;Stiglitz, 1999;Weil, 2009. Fakat bu çalışmada Ar-Ge harcamalarının patent başvuru sayısı üzerindeki etkisi araştırıldığı için bu kısımda yalnızca ilgili ampirik literatüre yer verilmiştir. ...
... Geleneksel yaklaşımın aksine -Ar-Ge'den patente doğru ilişkipatentin Ar-Ge üzerinde yol açabileceği potansiyel etkileri açıklığa kavuşturan çalışmalar da vardır: Almeida & Teixeira, 2007;Bessen, 2004;Miller, Benjamin, & North, 2012;Shapiro, 2001;Stiglitz, 1999;Weil, 2009. Fakat bu çalışmada Ar-Ge harcamalarının patent başvuru sayısı üzerindeki etkisi araştırıldığı için bu kısımda yalnızca ilgili ampirik literatüre yer verilmiştir. ...
Bu çalışmada seçili Ekonomik İşbirliği ve Kalkınma Örgütü (OECD) ülkeleri için 1995-2013 yıllık verileri kullanılarak araştırma ve geliştirme (Ar-Ge) harcamalarının patent başvuru sayıları üzerindeki etkisinin tahmin edilmesi amaçlanmaktadır. Bu doğrultuda değişkenler arasındaki uzun dönemli ilişkinin varlığını ortaya koymak üzere Westerlund Panel Eşbütünleşme yaklaşımı ile uzun ve kısa dönemli katsayıları tahmin etmek amacıyla Ortalama Gru p Tahmincisi (MGE) ve Havuzlanmış Ortalama Grup Tahmincisi (PMGE) yöntemleri kullanılmıştır. Eşbütünleşme testi değişkenler arasında uzun dönemli ilişkinin olduğunu göstermiştir. Uzun dönemde araştırma ve geliştirme harcamalarının patent başvuru sayıları üzerindeki etkisinin pozitif olduğu bulunmuştur.
In this study, it was aimed to estimate the effect of research and develeopment (R&D) expenditures on number of patent applications using annual data from 1995 to 2013 for selected Economic Cooperation and Development Organization (OECD) countries. Accordingly Westerlund Panel Cointegration approach for the purpose of determining long run relationship among variables, Mean Group Estimator (MGE) and Pooled Mean Group Estimato r (PMGE) methods with the aim of estimating long and short-run coefficients were used. The cointegration test illustrated that there was a long-run relationship between the variables. The effect of research and development expenditures on number of patent applications was found to be positive in the long run.
... For example, Marco and Rausser (2002) show that M&As of major agricultural business suppliers are designed to expand the IPRs portfolio. This is not surprising if we consider certain firms' behaviors related with IPRs such as patent blocking or the creation of patent thickets, which can generate incentives for firms to acquire other firms that hold strategic IPRs (Cohen, Nelson, and Walsh 2000;Bessen 2003). Then, we might expect that not only access to IPRs assets but also IPRs systems protecting these assets might induce M&As. ...
In this paper, we analyze whether the recent global process of strengthening and harmonization of intellectual property rights (IPRs) affects decisions of cross-border mergers and acquisitions (M&As). We investigate if IPRs have a differential effect across sectors of different technology content and for countries of different development level. Also, we study how imitation abilities of target countries interact with the tightening of IPRs. Using data for the post-TRIPS period (1995–2010), we estimate an extended gravity model to study the bilateral number of M&As, including a measure of the strength of IPRs systems on target countries and a set of control variables usually considered as determinants of M&As. The estimation results verify the gravity structure for M&As and show that IPRs –and enforcement– influence decisions of cross-border M&As in all sectors regardless of their technological content. However, IPRs are more important in countries with high imitation abilities and in sectors of high-technology content. Furthermore, a strengthening of IPRs leads to a larger increase of M&As in developing countries than in developed countries. These results call the attention on the possible implications for least developed economies and challenge the adequacy of a globally harmonized IPRs systems.
... For the latter, Bessen (2003) established the innovation competition model in two companies and found that compared with the patent competition mode of "winner take all" (winner takes all), in the jungle of patents, the method of cross licensing is conventional measures to alleviate the patent jungle problems. Under the situation of cross licensing, innovative achievements will have to be shared with other patent holders, more detailed, the innovators' benefits has suffered damage in the solution which will reduce the incentive for innovation [17]. Moreover, the key factor of enterprise R&D investment incentive is time leading edge, and the cross-licensing will make the innovation disappear. ...
... Practically, patent offices are responsible for organizing, and have jurisdiction over, the patent-approval process. Contrary to arguments that the approval process is trivial because patent offices approve virtually any application (Lemley and Sampat 2008), a growing number of studies have shown that the failure rates for patent applications are much higher than earlier work has assumed (Bessen 2003, Harhoff and Reitzig 2004, Harhoff and Wagner 2009, von Graevenitz et al. 2011, Carley et al. 2015. Theoretically, examining the role of patent offices is important because 134 Organization Science, 2017, vol. ...
Theories of innovation and technical change posit that inventions thatcombine knowledge across technology domains have greater impact thaninventions drawn from a single domain. The evidence for this claim comesmostly from research on patented inventions and ignores failed patentapplications. We draw on insights from research into institutionalgatekeeping to theorize that, to be granted, patent applications that spantechnological domains must have higher quality than otherwise-comparable,narrower applications. Using data on failed and successful patentapplications, we estimate an integrated, two-stage model that accounts forthis differential selection. We find that more domain-spanning patentapplications are less likely to be approved, and that controlling for thisdifferential selection reduces the estimated effect of knowledgerecombination on innovative impact by about half. By conceptualizing thepatent-approval process as a form of institutional gatekeeping, this paperhighlights the institutional underpinnings of and constraints on theinnovation process.
... For example, Marco and Rausser (2002) show that M&As of major agricultural business suppliers are designed to expand the IPRs portfolio. This is not surprising if we consider certain behaviors related with IPRs such as patent blocking or the creation of patent thickets, which can create incentives for firms to acquire other firms that hold strategic IPRs (Bessen, 2003;Cohen et al., 2000). Then, we might expect that not only access to IPRs assets but also IPRs systems protecting these assets might induce M&As. ...
This paper analyses whether the strengthening of intellectual property rights (IPRs) systems affects decisions of cross-border mergers and acquisitions (M&As), and if their influence is different for developed and developing countries, and across industrial sectors. We estimate an extended gravity model to study bilateral number of M&As using data for the post-TRIPS period (1995-2010) and two different indexes that measure the strength of IPRs systems at the country level. We find that IPRs influence decisions of cross-border M&As in all the sectors of different technological content. Furthermore, a strengthening of IPRs leads to a larger increase of M&As in developing countries than in developed countries. This calls the attention on the possible implications for least developed economies.
... 61 In early 2011 Bishop Steering was taken over by Georgsmarienhütte Group. 62 As the name implies, Bishop's speciality is vehicle steering systems, and it acquired 51 US patents in the period 1988 to 2005. According to the press release issued by its new owner, Bishop actively licensed its technology to manufacturers of steering gears and components: "BISHOP has over 250 patents and patent applications in 17 countries as well as numerous licensees worldwide." ...
The limitations of using patent data as a measure of technological innovation have long been known (Griliches, 1990). Despite this, patent data are frequently used in this way, providing potentially misleading analyses for policy makers. Kingston and Scally (2006) have shown that, for countries outside the NAFTA region, USPTO small enterprise data can provide a potentially more valid means of identifying genuine innovative activity in small and medium sized economies. This exploratory analysis investigates whether the Kingston/Scally analysis can be extended from inventors to assignee firms and considers the challenges of making this conversion. It also explores whether such a data series can be used to develop a typology of innovating firms which can be of interest for research and policy analysis purposes.Using granted patent data from the USPTO BIB series from 1969 to 2010 for Australian inventors are used to identify patents granted to firms. Converting the data to a set based on the residence of the firm owning the patent is tedious but not difficult. Nonetheless given the importance for policy purposes of focusing on innovative firms, it would be very useful if the USPTO were to include the assignee residence as a key variable in its datasets. More challenging, of course, is trying to ensure identification of all patents owned by any one firm. Typographical errors, keying errors and name changes make this a particularly tedious issue. It would be helpful if patent offices were to require (and use) a firm’s company number as the principle identifier for data on a patent. In addition there are problems arising from changes in firm ownership and how these should be treated.Three principal groupings of firms stand out – those which patent only once (the large majority); Silverbrook, with a portfolio of thousands of US patents; and some 400 firms with at least several US patents granted since 1995. A discussion of those firms with significant US patent holdings shows a variety of types of innovation leadership.
... Thus very many patent applications are filed for reasons that are dysfunctional in terms of overall economic welfare (blocking rivals) or because of the very existence of the patent system (preventing infringement suits or participating in negotiations for access to complementary or overlapping technologies) (Cohen et al., 2000). Indeed it is well known that in complex technology fields -particularly electronic goods -firms amass substantial numbers of patents in order to exchange access to their patent portfolios and then get on with business without having to worry about patents (Merges and Nelson, 1990;Bessen, 2003;Cohen, 2005). This is rather like the world where the Emperor has no clothes. ...
This paper summarizes the empirical research on the patent system and on data protection. This is done in the context of the 2015-16 Australian Productivity Commission Inquiry into Intellectual Property Arrangements. The major focus is on whether the patent system is effective and efficient - that is, does it grant patents only for inventions that would not otherwise have occurred and which have net positive spillover benefits. These are the criteria for a parsimonious patent system - one that minimizes damage to consumers and follow-on inventors. In general patent systems are seen to fail this test largely because the inventiveness (non-obviousness) requirement is far too low. Beyond this, patent privileges are seen to be too extensive, now that the local working requirement has been removed. Further, penalties are one-sided encouraging applicants to apply for almost uninventive inventions. In regards to data protection questions are raised about both the economics and the ethics of providing data protection.
... Innovation researchers have consistently found that more technologically "broad" patents, those which draw on more unconnected streams of prior work, have more impact, in the form of higher forward citation rates, than technologically "narrow" patents (Fleming 2001, Rosenkopf & Nerkar 2001, Nerkar 2003, Sorenson & Fleming 2004, Fleming, Mingo & Chen 2007, Gruber, Harhoff & Hoisl 2012. Meanwhile, research on the patenting process has found suggestive evidence that broader patent applications produce more legal confusion, spend longer under review, and are granted at lower rates (Bessen 2003, Harhoff & Reitzig 2004, Harhoff & Wagner 2009, von Graevenitz, Wagner & Harhoff 2011. Thus while innovation research suggests that citation breadth is a mark of quality, research on patent applications suggests that citation breadth is a mark of illegitimacy. ...
Theories of innovation and technical change posit that inventions that combine knowledge
across technology domains have greater impact than inventions drawn from a single domain. The evidence for this claim comes mostly from research on patented inventions and ignores failed patent applications. We draw on insights from research into institutional gatekeeping to theorize that, to be granted, patent applications that span technological domains must have higher quality than otherwise-comparable, narrower applications. Using data on failed and successful patent applications, we estimate an integrated, two-stage model that accounts for this differential selection. We find that more domain-spanning patent applications are less likely to be approved, and that controlling for this differential selection reduces the estimated effect of knowledge recombination on innovative impact by about half. By conceptualizing the patentapproval process as a form of institutional gatekeeping, this paper highlights the institutional underpinnings of and constraints on the innovation process.
... chemicals and pharmaceuticals), can patents reduce IPO underpricing. In a study on the software industry, patents were found to be rare (Mann and Sager, 2007) with weak patent protection for the industry (Bessen, 2003;Bessen and Hunt, 2007). Useche (2014), in a study of the software industry, found that patenting is used strategically by firms going public, with greater influence on IPO valuation in industries where patenting is uncommon. ...
Compliance to Sarbanes-Oxley (SOX) legislation represented a new and sizable cost for firms going public. For research-intensive firms, characterized by a substantial portion of their firm value comprising intangible assets, this cost was a disproportionately burdensome additional hurdle to going public. We investigated how the market responded to this change in the initial public offering (IPO) environment in valuing research intensive firms going public pre-and post-SOX. In particular, we focused on whether the existence of patents was a valuable signal of the effectiveness of research and development expenditures (R&D) under these new conditions. Our findings indicate decreased importance of R&D (signaling " effort " to be innovative), and increased importance of patent activity (representing " results " of efficacy in R&D efforts), both standalone and as a moderator of R&D, as IPO value drivers post-relative to pre-SOX. Specifically, while the market value of the firm improved with the presence of R&D at time of IPO throughout the sample, R&D influenced market value less after SOX. We also found that patent activity's role as an IPO value driver changed after SOX legislation was enacted. In the overall sample patents effect changed from negative to insignificant pre-to post-SOX; among small IPOs, the effect changed from insignificant to positive. Lastly, in the after-SOX sub-sample, the positive influence of R&D on IPO valuations increased as patent activity increased. We conclude that patent activity at least partially replaced and moderated R&D in its role as a value driver of IPOs in the post-SOX environment.
... Shapiro (2001) has observed that a stronger patent system seems to be increasing number of multiple blocking patents. Bessen (2003) has presented an argument that low patent standards can lead to the development of patent thickets. Whether strengthening of the patent regime had led to low patenting standards has been addressed int the works of Jaffe (2000). ...
Does a strengthening of the patent regime impact R&D expenditure? For the US semiconductor industry, a strengthening of the patent regime in the 1980s was followed by a sharp increase in patenting but had almost no impact on R&D expenditure. This paper attempts to understand this patent paradox by taking some of the industry features into account. We present a model of invention and product development in complex industries where product development involves putting together a large number of inventions and where licensing of patentable inventions is common. While a stronger patent regime leads to higher patenting in both in presence and absence of licensing, the positive relationship between patenting and R&D is weakened in presence of licensing since licensing provides an alternative way of accessing inventions. A stronger patent regime, therefore, may only create weak incentives to increase R&D, while strongly increasing patenting activities in such an industry.
... Hall and Ziedonis (2001) show also that in the US semi-conductor industry, the need to cross-license complementary patents has led the …rms to engage into strategic patenting, which may …nally be detrimental to competition and innovation. Testing a theoretical model developed by Bessen (2003), Bessen and Hunt (2004) show that a weak enforcement of patent requirements in the software industry leads to similar strategies of patent portfolio building and cross-licensing. They …nd that strategic patenting has a negative e¤ect on innovation, because it does not correspond to real innovation, and it raises the cost of innovation for other …rms. ...
La théorie économique aborde généralement le brevet comme un droit exclusif temporaire portant sur un produit ou un procédé, et conférant de ce fait un profit de monopole à l'innovateur. Cette approche permet notamment de mettre en évidence le rôle incitatif du brevet, qui permet de rentabiliser à posteriori les investissements nécessaires à l'innovation. Elle ne permet cependant pas de rendre compte correctement de la réalité des brevets dans de nombreux secteurs, où : - un produit donné peut être couverts par un grands nombre de brevets (c'est le cas d'un microprocesseur, d'un téléphone portable ou d'un kit de diagnostic génétique) - les différents brevets couvrant ce produit peuvent appartenir à différents innovateurs, ayant chacun créé ou amélioré des composants du produit. Ce cas de figure est de plus en plus fréquent dans la plupart des industries contemporaines, et constitue notamment la norme dans des industries très innovantes comme les semi-conducteurs, les équipements de télécommunication, l'informatique ou les biotechnologies. Un rapport de la Federal Trade Commission américaine publié en 2003 rappelait par exemple que plus de 90 000 brevets américains liés aux microprocesseurs étaient alors détenus par plus de 10 000 entités, tandis qu'environ 420 000 brevets liés aux semi-conducteurs étaient détenus par environ 40 000 entités . Les économistes ont jusqu'ici principalement mis l'accent sur les coûts statiques (de recherche d'antériorité, de négociation, de licences, de litige) induits par la fragmentation et la dispersion des brevets. La thèse vise à dépasser cette analyse en éclairant la façon dont les entreprises instrumentalisent le brevet dans un contexte de fragmentation de la propriété industrielle, et en montrant comment ces stratégies fondées sur les brevets affectent in fine la dynamique de la concurrence et de l'innovation dans les industries concernées. L'approche adoptée est théorique, et consiste à utiliser les outils analytiques de la théorie des jeux pour étudier des situations d'interactions entre détenteurs de brevets dans un secteur donné. Les méthodes de modélisation utilisées permettent à la fois d'expliquer les comportements observés dans la vie des entreprises, et de tirer des conclusions quant-à leur impact positif ou négatif sur la concurrence et l'innovation. La thèse est structurée en trois parties et cinq chapitres. Partie 1: L'économie du droit des brevets La première partie est consacrée à l'analyse économique du système de brevets, c'est-à-dire l'ensemble des règles et institutions qui constituent le droit des brevets. Le premier chapitre s'appuie sur la littérature économique pour passer en revue l'ensemble de ces règles et leurs fonctions économiques respectives. Il met en évidence les variables de commandes accessibles au régulateur soucieux de promouvoir l'innovation, ainsi que les prescriptions qui s'y attachent. Est notamment discutée la capacité des règles uniformes qui forment le droit des brevets à s'adapter de façon efficace à des contextes d'innovation différents. Cette démarche est appliquée successivement à des innovations de coûts et de valeurs différents, à des innovations cumulatives (développées les unes à partie des autres), et au problème de la défense des brevets devant les tribunaux. Dans tous les cas, il est montré que la protection conférée par le brevet n'est pas définie directement en termes économiques, ce qui confère au système une plus grande souplesse d'adaptation à différents contextes d'innovation. Le second chapitre porte sur une loi spécifique de la législation du brevet, à savoir le test de "non évidence" qu'une invention doit satisfaire pour justifier l'octroi d'un brevet. Cette règle a une influence importante sur le degré de fragmentation des brevets, et in fine sur l'efficacité des investissements en R&D. Un modèle théorique est présenté pour démontrer qu'une application sévère du test permet de limiter des effets négatifs d'une fragmentation excessive de la propriété industrielle. Le modèle décrit les stratégies d'investissement de deux entreprises cherchant à développer un produit commercialisable composé de deux innovations complémentaires. Dans ce cadre le test de "non évidence" est considéré comme sévère si seul le produit final est brevetable, tandis que chaque élément complémentaire serait brevetable séparément en cas d'application moins sévère du test. L'application d'un test sévère permet de limiter les coûts induits par la fragmentation des brevets, mais elle réduit par ailleurs le bénéfice lié à la publication du brevet, qui consiste à éviter la duplication des coûts de R&D en révélant au concurrent qu'un élément a déjà été développé et protégé. Bien qu'une exigence sévère de non évidence puisse occasionner des coûts de duplication, car les petites innovations ne sont ni brevetées, ni rendues publiques, le modèle montre que le fait de déterminer un seuil minimum de non évidence est un moyen efficace de limiter les coûts associés à la fragmentation des droits. Partie 2. Brevets et persistance des entreprises dominantes La seconde partie s'inscrit dans le débat classique en économie sur le lien entre innovation et structure de marché - la question étant de savoir si l'innovation facilite la persistance des entreprises en place ou si elle favorise au contraire l'émergence de nouveaux concurrents. Dans le cadre de la thèse, la question posée consiste à savoir si l'instrumentalisation des brevets profite plutôt aux entreprises dominantes déjà en place ou bien à l'entrée de nouveaux concurrents sur le marché. Cette question est traitée à travers deux chapitres: le chapitre 3 est une revue de la littérature, le chapitre 4 présente un modèle théorique. La revue de la littérature est menée dans un cadre théorique unifié, dérivé du modèle fondateur développé par Arrow (1962) pour étudier comment l'innovation affecte la structure du marché. Les brevets et les stratégies fondées sur les brevets sont introduits dans ce cadre afin d'observer comment ils influencent la capacité des entreprises dominantes à renforcer et préserver leur position face à de nouveaux entrants. Cette approche révèle que l'introduction des brevets et des stratégies d'obtention de licences dans la théorie traditionnelle de l'innovation tend à inverser le résultat standard selon lequel l'innovation favorise l'émergence de nouveaux compétiteurs plutôt que la pérennité des entreprises dominantes. Le résultat standard repose sur le fait qu'un nouvel entrant a plus à gagner en innovant, car il pourra ainsi récupérer une partie du chiffre d'affaire de l'entreprise en place qui, elle, ne profite de l'innovation qu'à la marge. Dans ce contexte, les brevets permettent néanmoins à l'entreprise à place de préserver sa position en rachetant à l'entrant potentiel son innovation (brevetée) à un prix supérieur à ce que l'innovateur aurait pu en tirer en l'exploitant lui-même. En effet une telle opération permet d'éviter la dissipation des profits à l'échelle du secteur suite à l'entrée d'un nouveau concurrent. De plus un leader technologique peut préserver son avance en accordant des licences à ses concurrents, qui auront dès lors moins d'incitation à investir en R&D pour rattraper ou dépasser le leader. La revue de la littérature montre enfin que ces résultats sont renforcés lorsque la propriété intellectuelle des innovations est fragmentée. Le modèle présenté dans le chapitre 4 approfondit la question de la persistance des entreprises dominantes grâce aux brevets lorsque la protection des innovations est fragmentée. Il montre que lorsque l'innovation est cumulative, une entreprise dominante est en mesure de préempter un brevet susceptible de permettre le développement d'une innovation drastique (qui rend économiquement obsolètes toutes les autres technologies du marché) également brevetable. Si un brevet "amont" donnant un droit sur l'innovation "aval" est mis aux enchères (par exemple par un laboratoire de recherche), l'entreprise dominante en place proposera un montant supérieur à ce qu'un nouvel entrant serait prêt à payer. En effet le modèle montre que le montant que les firmes peuvent proposer pour le brevet "amont" dépend de leur pouvoir respectif de négociation, dans le cas ou le brevet "amont" appartiendrait à une entreprise et le brevet "aval" à une autre. Comme la firme en place réalise un profit même si l'innovation n'est pas commercialisée, elle a un pouvoir de négociation plus grand et peut ainsi préempter des brevets de base qui pourraient déboucher ultérieurement sur des innovations capitales. Le modèle montre par ailleurs que dans certains l'entreprise dominante n'aura pas intérêt à exploiter les brevets ainsi acquis. Partie 3. Les brevets bloquants et les investissements en R&D La troisième partie est constituée d'un unique chapitre. Un modèle théorique y est développé pour étudier les incitations qu'ont des firmes concurrentes à utiliser leurs brevets respectifs pour se bloquer mutuellement. Le modèle permet également d'examiner l'opportunité pour les entreprises de signer des accords de licences croisés avant d'investir, et d'évaluer l'impact de tels accords sur l'efficacité de la R&D. Le modèle décrit deux entreprises symétriques qui investissent en R&D pour développer de nouveaux produits. Les entreprises opèrent indépendamment l'une de l'autre, de sorte que leurs produits, bien que parfaitement substituables, sont différents et protégés par des brevets différents. Le modèle tient cependant compte du fait que les revendications des brevets peuvent déborder les limites des innovations concernées, de sorte que les entreprises peuvent s'en servir opportunément pour bloquer le produit développé par leur concurrent. Ce modèle met en lumière le comportement de "passager clandestin" des détenteurs de brevets, qui tendent à réduire leurs propres investissements en R&D en espérant pouvoir s'approprier les profits de leur concurrent. Dans un tel contexte où le pouvoir bloquant des brevets induit une diminution des investissements, les accords de licence signés avant de développer de nouveaux produits peuvent favoriser la concurrence. Lorsque les brevets ont un faible pouvoir de blocage, le modèle permet de conclure que ces accords de licences freinent néanmoins la concurrence car elles permettent aux entreprises de s'entendre sur le niveau de leurs investissements de manière à réduire le risque d'une confrontation sur le marché du produit. Le modèle montre également qu'il peut être dommageable pour le progrès social que les tribunaux diminuent l'étendue des droits conférés des brevets. En effet cela incite les entreprises à établir des accords ex ante, qu'ils soient favorables ou non à la concurrence. Le modèle permet enfin de saisir comment les entreprises sont incitées à accroître leur pouvoir de blocage en ajoutant de nouveaux brevets à leur portefeuille. Il prédit notamment que les entreprises vont utiliser cette stratégie dans des domaines où le développement de nouveaux produits est relativement aisé, afin de réduire l'intensité de la concurrence de la R&D. Dans ce cas, les stratégies d'équilibre des brevets nuisent au profit si le coût de dépôt de nouveaux brevets est peu élevé. Au contraire, les entreprises ne sont pas incitées à se lancer dans de telles stratégies si la R&D est déjà coûteuse et incertaine, Ce qui explique par exemple pourquoi les entreprises sont -relativement- moins portées à accumuler de vastes portefeuilles de brevets dans des industries pharmaceutiques ou chimiques.
... Software companies with patents may use them in cross-licensing negotiations to defend themselves against litigation. Moreover, firms may accumulate patent "thickets" or set up patent pools to increase their market power and pose entry barriers or disincentives to other innovators (Bessen 2003;Bessen and Meurer 2008). A patent portfolio may convince different kinds of investors that a company may be a worthwhile investment (Mann 2005;Mann and Sager 2007;Useche 2014). ...
We test whether patenting activity impacts on software companies' likelihood of survival after going public in the UK, Germany, France, Sweden, Italy and Spain. Our database covers all software companies undertaking IPOs in these six countries between 1 January 1997 and 31 December 2005, and includes data from various sources (the Bureau van Dijk Zephyr database, the Questel-Orbit QPAT patent database, financial documents available on the company websites and specialised websites). Survival analysis follows a semi-parametric approach, based on the stratified Cox competing risk model, controlling for other determinants of survival. We find that, after controlling for the firms' main entry characteristics (experience, size, sales, profitability and solvency, together with market conditions), the influence of the size and the quality of the firms' patent portfolios is different according to the type of exit and the type of software firm. In particular, the number of patents reduces the risk of failure and acquisition for software developers, while quality increases their attractiveness as an acquisition target.
El ejercicio de derechos de propiedad intelectual, particularmente en industrias como la farmacéutica, ha suscitado una discusión sobre los efectos anticompetitivos que pueden derivarse de las prerrogativas otorgadas por las patentes. Esta discusión ha logrado reunir a quienes sugieren que las normas de propiedad intelectual y las de protección a la competencia son regímenes antinómicos, como a quienes estiman que se trata de un conflicto aparente. Aun cuando en la actualidad la postura preponderante es que se trata de un conflicto aparente y que, por el contrario, son regímenes que persiguen objetivos compatibles, las prácticas de patentamiento que se presentan en industrias como la farmacéutica mantienen vigente esta discusión. Una de estas prácticas presuntamente anticompetitiva a juicio de algunos son los patent thickets o marañas de patentes. El presente escrito pretende abordar las vicisitudes sobre su definición, su relación con otros conceptos, como el patentamiento estratégico, y los pronunciamientos jurisprudenciales al respecto, haciendo visibles las aristas que esta problemática plantea de cara a la compatibilidad o incompatibilidad de los regímenes de propiedad intelectual y protección a la libre competencia.
Because of the heterogeneity of the patent protection system and the business environment across countries, the private value of patents varies. Therefore, current approaches that mostly consider the level of patent protection have limitations in capturing the strategic value of patents. This paper suggests a new approach for estimating the perceived private value of a patent in a country by considering the scale of trade in the United States, Europe, China, Japan, Korea, Brazil, India, Canada, and Russia. The results indicate that the value of patents in a country changed over the sample period, regardless of the level of patent protection, suggesting that changes in the strategic business value of patents played a key role in the value of patents in those countries.
In the Veblen-Commons view of the business enterprise as going concern, the primary goal of the enterprise is to engage in sequential acts of production through time. To that end, intangible assets play a crucial role in providing a differential advantage, granting the owners an income stream separate from normal activity that more easily allows them to achieve this purpose. Therefore, understanding the business enterprise from a Veblen-Commons perspective requires first and foremost an understanding of the way in which such assets confer this differential advantage. In doing so, two things become clear: First, such assets are grounded in law and accounting, and as such, any discussion of them must include a discussion of how they emerge in a legal process and how accountants treat them on the balance sheet. Second, as the enterprise evolves, so too does the form of the differential advantage. This article incorporates both of these points to provide a clear, coherent framework of intangible assets within the business enterprise from a Veblen-Commons perspective that can be used to understand a financialized economy.
Information and communication technologies, nanotechnologies and microelectronics are progressively challenging the current state of intellectual property rights. This is related to the economic features underlying these technologies. The directions of changes in intellectual property rights are found to require further coping with the overall chain of innovation and with the uncertainty that can be embedded in the new trends of technological development.
On the Tragedy of the Anticommons in the American & European Patent system (in Dutch).
This thesis analyses the problem of patent holdup in the European ICT standardisation process with regard to wireless telecommunications standards. The European standardisation system is based on a co-regulatory model involving collaboration between the European Commission and ETSI with the goal to promote innovation, competition, and consumer welfare via the promulgation of interoperability, harmonised, standards. Often however proprietors of standard essential patents (SEPs) opportunistically holdup users/implementers of SEPs.
The thesis maintains that, despite existing soft-law mechanisms and antitrust measures, patent holdup is an issue that can readily recur, and attributes this to the capture of the co-regulatory regime. It shows that the soft-law mechanisms, including the ETSI IPR Policy, FRAND terms, European Commission’s Guidelines and its policy initiatives and strategies for achieving the European Digital Single Market, are insufficient to mitigate patent holdup.
This thesis set out to determine whether patent holdup is a form of regulatory capture undermining the public interest rationale of standard setting. To do so, first, it frames patent holdup in theory and practice. Second, it scrutinises the dynamics of co-regulation in standard setting and how patent holdup is factored into the regulatory capture paradigm. Third, it analyses how theories of regulation, particularly agency theory, inform this assessment and therefore diagnose regulatory capture in EU ICT standard setting. Finally, the thesis investigates the possibility for ex ante regulatory and ex post competition law tools to enable policy recommendations.
This analysis ultimately contributes to the scholarship with regard to the regulation of strategic and opportunistic behaviour of SEP holders. This study should, therefore, be of value to identifying effective measures to restore balance in standard setting consistent with the public interest. This becomes even more important as wireless telecommunications standards have been an intrinsic component to the formation of the European Digital Single Market.
Patent thickets have been identified as a major stumbling block in the development of new technologies, creating the need to accurately identify thicket membership. Various citations-based methodologies (Graevenitz et al., 2011; Clarkson, 2005) have been proposed, which have relied on broad survey results (Cohen et al., 2000) for validation. Expert evaluation is an alternative direct method of judging thicket membership at the individual patent level. While this method potentially is robust to drafting and jurisdictional differences in patent design, it is also costly to use on a large scale. We employ a natural language processing technique, which does not carry these large costs, to proxy expert views closely. Furthermore, we investigate the relation between our semantic measure and citation based measures, finding them quite distinct. We then combine a variety of thicket indicators into a statistical model to assess the probability that a newly added patent belongs to a thicket. We also study the role each measure plays, as part of creating a prospective screening model that could improve efficiency of the patent system, in response to Lemley (2001).
Patent thickets have been identified by various citations-based techniques, such as Graevenitz et al (2011) and Clarkson (2005). An alternative direct measurement is based on expert opinion. We use natural language processing techniques to measure pairwise semantic similarity of patents identified as thicket members by experts to create a semantic network. We compare the semantic similarity scores for patents in different expert-identified thickets: those within the same thicket, those in different thickets, and those not in thickets. We show that patents within the same thicket are significantly more semantically similar than other pairs of patents. We then present a statistical model to assess the probability of a newly added patent belonging to a thicket based on semantic networks as well as other measures from the existing thicket literature (the triples of Graevenitz and Clarkson's density ratio). We conclude that combining information from semantic distance with other sources can be helpful to isolate the patents prospectively that are likely to be members of thickets.
During the last decade, the genomics revolution has created powerful instruments for genetic manipulation of living organisms. In addition, new biotechnological tools allow modifying organisms in order to perform specific tasks. In particular, synthetic biology is a fast-developing and transdisciplinary field that uses engineering principles to design and assemble novel biological components. For example, within the area of industrial microbiology, synthetic biology has contributed to build from scratch or reengineer new microorganisms or chemical compounds. However, all these scientific and biotechnological innovations present a substantial challenge also for the law and especially for intellectual property rights. Considering this multifaceted scenario, this chapter discusses the current challenges and opportunities at the intersection of synthetic biology, microbiology, and intellectual property also reflecting on alternative forms of protection for genetically engineered works created by using synthetic biology.
Unlike with zinc finger nuclease and transcriptional activator-like effector nuclease DNA modification technologies that rely on lead proteins, developed through expensive and time-consuming processes, the clustered regularly interspaced short palindromic repeat (CRISPR)/Cas system has rapidly emerged as the most promising gene-editing technology to date for the modification of any selected DNA sequence. CRISPR is receiving tremendous fanfare due, in part, to its potential to provide a means to fundamentally alter medical genetics and especially cancer medicine. In this review, we compare key technologies of genome-editing zinc finger nucleases, transcriptional activator-like effector nucleases and CRISPR, with a focus on the race to acquire lucrative intellectual property rights, the current CRISPR patent dispute and potential repercussions on innovation and the adoption of this promising technology by the medical community.
Compulsory licence provisions in patent law are always hailed as an effective mechanism to curb the abuse of exclusive rights by the patent holder. This is also projected as a tool to facilitate access to patented products at affordable cost. This age-old belief has to be relooked into with the changes in the industry practices. The attempt in this chapter is to explore the emergence of compulsory licence provisions in general and its evolution in India. A brief analysis of the pre-TRIPS provisions in the Indian Patent Act 1970 is attempted to find out its use by the Indian industries. An elaborate study of the post-TRIPS provisions of the Indian Patent Act, along with the analyses of its interpretations by judicial authorities, is also undertaken to examine its effectiveness in the new context. A brief attempt is also made to find out the attitude of Indian industries in using these provisions.
Cross-licensing strategies aim to reduce litigation expenses in patents and to expand market territories by limiting the competition by using the other party’s patent rights. The present study portrays the vicious cross-licensing strategy used by ITES companies as a tool to reduce risk and make profits. The competency of the model was demonstrated with the Herfindahl-Hirschman Index. The case study concludes that multiple cross-licensing business models are indispensable to get rid of tangible losses in transnational risk management.
This thesis studies the role of essential patents for the coordination of innovation in ICT standards. The increasing number of essential patents around technological standards is an increasing challenge for standardizing firms. In response, these firms have developed innovative coordination mechanisms, and in particular patent pools and informal standards consortia. This thesis sheds light on the function of essential patents as a distinctive appropriation mechanism tailored to cumulative innovation. This mechanism can however induce incentives for opportunistic strategies, which can be even exacerbated by patent pools. Nevertheless, patent pools also lead to an increase in the number of patented technologies developed for technological standards. Informal consortia induce an increase in the number of standard-related patents when incentives to innovate are insufficient. When the incentives to innovate are excessive, the effect of consortia on the number of patents is weaker, or even negative. Essential patents have an incidence on the technological progress of standards. For instance, inclusion of essential patents induces a more continuous type of technological progress, consisting in many small standard updates, and avoiding discontinuous standard replacements.
Diese Dissertation behandelt Fragen des Wettbewerbs auf Softwaremärkten. Konkret geht es um folgende Frage: Welchen Einfluss haben kleine und mittelständische Unternehmen (KMUs) auf die Wettbewerbskonditionen in der Softwarebranche vor dem Hintergrund des zunehmenden Einsatzes von rechtlichen Maßnahmen zum Schutze des geistigen Eigentums? Theoretischer Teil: Wir untersuchen theoretisch Übertragungseffekte (Spillovers) zwischen KMUs und größeren Softwareunternehmen im Kontext von gebündelten Produkten (bundling). Während Bundling und die resultierenden wettbewerbspolitischen Optionen in einem statischen Kontext gut verstanden sind, gibt es noch offene Fragen im dynamischen Kontext. Hier untersuchen wir, inwieweit die Standardargumente gegen Bundling an Gültigkeit verlieren. Wir kommen zum Schluss, dass Wettbewerbspolitik in Softwaremärkten in einem dynamischen Kontext Bundling durchaus in Betracht ziehen sollte. Empirischer Teil: Wir untersuchen, ob der zunehmende Einsatz von Schutzrechten durch KMUs dazu führt, dass der Wettbewerb im Bereich der Informations- und Kommunikationstechnologien (IuK) zunimmt. Diese empirisch fundierte Arbeit analysiert einen Datensatz von KMUs aus der IuK-Industrie unter besonderer Berücksichtigung von Softwareherstellern. Mit Hilfe einer Varianzanalyse untersuchen wir den Einfluss von vier Faktoren auf den Einsatz von Schutzrechten, nämlich: Globalisierung, rechtliches Umfeld, kooperative Forschung und Open Source Software-Nutzung.
In this section we explore three main obstacles to the development of an effective and coherent innovation policy in the European Union: the saga of the EU patent, the problems faced by technology and knowledge/transfer legislation, and EU standardization policy. We find that in these areas, despite a long-standing debate and several attempts to converge on more socially desirable outcomes, a lot still needs to be done before the European Union will be able to count on effective and efficient legal rules and institutions that could serve as catalysts for breakthroughs in research and innovation in the EU27.
We examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation. Recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to R&D. Yet the propensity of semiconductor firms to patent has risen dramatically since the mid-1980s. We explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 US semiconductor firms during 1979-95. The results suggest that the 1980s strengthening of US patent rights spawned "patent portfolio races" among capital-intensive firms, but also facilitated entry by specialized design firms.
This article extends the theory of optimal patents to allow for costly imitation of patented innovations. With costly imitation, a rival's decision to imitate depends on the length of patent protection awarded to the patentee: the longer the patent life, the more likely it is that rivals will "invent around" the patented product. Extending patent life, therefore, may not provide the innovator with increased incentives to research or to patent the innovation. In this case, I find that optimal patent lives are sufficiently short to discourage imitation. With both patent length and breadth as instruments, the optimal policy consists of broad patents (no imitation allowed) with patent lives adjusted to achieve the desired reward. These results are in sharp contrast to recent results on the optimality of narrow, infinitely long patents.
I explore the trade-off between a patent's length (that is, its lifetime) and its width (that is, its scope of coverage). A wider patent generally reduces the distortion of consumers' choices between the patented brand of the product and unpatented, lower-priced varieties sold by competitors but also permits higher prices, which increase (relative to profits) the deadweight losses from consumers switching consumption out of the product class. I show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short-lived but very broad patents are optimal.
In providing rewards to innovators, there is a tradeoff between patent length and breadth. This article provides conditions under which the optimal patent policy involves infinitely-lived patents, with patent breadth adjusting to provide the required reward for innovation.
This article establishes the relationship between the static axiomatic theory of bargaining and the sequential strategic approach to bargaining. We consider two strategic models of alternating offers. The models differ in the source of the incentive of the bargaining parties to reach agreement: the bargainers' time preference and the risk of breakdown of negotiations. Each of the models has a unique perfect equilibrium. When the motivation to reach agreement is made negligible, in each model the unique perfect equilibrium outcome approaches the Nash bargaining solution with utilities that reflect the incentive to settle and with the proper disagreement point chosen. The results provide a guide for the application of the Nash bargaining solution in economic modelling.
U.S. patent reform over the past two decades has strengthened the legal enforcement of patent rights and has extended protection to new subject matter, such as genetically engineered life forms and business methods. This paper highlights these and other policy changes and the debate that this apparent increase in protection has sparked. While the case for stronger patents as a spur to innovation is a weak one, as revealed by recent theoretical and empirical research, evidence that they encourage disclosure and technology transfer is persuasive. The paper discusses the social costs and benefits of these effects from the policy changes and proposals for alleviating the costs through further patent reform.
The Draper Company's commitment to research and development was unparalleled among other nineteenth-century American manufacturers in older industries. This innovative drive, coupled with a strategy of patent defense and control, carried the firm to the top of the cotton textile machine industry by the end of the century. The company's 1907 decision to follow a less innovative path seemed sensible in light of its secure position in a volatile market, but the costs in long-term competitive strength were high.
This paper studies the nature and consequences of competition in R and D and the relationship between this form of competition and competition in the product market, by focusing on comparisons of speed of research, number of independent research laboratories, and level of risk undertaken. Among the results: competition in the current product market reduces the level of innovation (relative to monopoly); competition in R and D increases the level of innovation, possibly beyond the socially optimal level. Under certain conditions, it pays a monopolist to preempt potential competitors, thereby enabling the monopoly to persist. Market equilibrium may entail excessively fast research with insufficient risk-taking. 25 references, 5 figures.
The analysis of the timing of innovation posits a particular innovation and examines the way the expected benefits, the cost of research and development, and interactions among competing firms combine to determine the pattern of expenditure across firms and over time, the date of introduction, and the identity of the innovating firm. In the case of a sequence of innovations, the expected lifetime of a given innovation and the pattern of technological leadership are also determined endogenously. Given that an innovation has been perfected, the extent and timing of its dissemination into use may be examined. This may depend upon a number of factors, including the existence of rival firms and institutions, which may facilitate or retard the dissemination of innovations. The chapter discusses the issues of innovation production in the context of symmetric noncooperative models. The chapter investigates the extent of dissemination of the innovation, where this dissemination is achieved through licensing.
Innovation and the management of intellectual capital are playing an increasingly important role in competition in high-technology industries. To operate in markets where innovation is cumulative, such as in electronics and semiconductors, firms frequently need to engage in extensive licensing and cross-licensing. This need is amplified by recent increases in the strength of patent protection and by the more active licensing stance of intellectual property owners. A high-quality patent portfolio not only reflects the firm's inventive capacity, but may significantly increase its crosslicensing bargaining ability and reduce royalty payments. In addition, it may directly contribute to its product and process innovation.
We consider the case where the introduction of a new product requires the development of two distinct complementary technologies. A firm can seek to either develop both technologies, or one of them and engage in a cross licensing with another firm that has developed the complementary technology. We focus on the interdependence between the innovation race and the cross licensing game, i.e., how the potential continuation of the race affects the cross licensing terms and how the possibility of cross licensing affects the pace of the innovation race.
This paper studies the nature and consequences of competition in R&D and the relationship between this form of competition and competition in the product market, by focusing on comparisons of speed of research, number of independent research laboratories, and the level of risk undertaken. Among the results: competition in the current product market reduces the level of innovation (relative to monopoly); competition in R&D increases the level of innovation, possibly beyond the socially optimal level. Under certain conditions, it pays a monopolist to preempt potential competitors, thereby enabling the monopoly to persist. Market equilibrium may entail excessively fast research with insufficient risk-taking.
The "tragedy of the commons" metaphor helps explain why people overuse shared resources. However, the recent proliferation of intellectual property rights in biomedical research suggests a different tragedy, an "anticommons" in which people underuse scarce resources because too many owners can block each other. Privatization of biomedical research must be more carefully deployed to sustain both upstream research and downstream product development. Otherwise, more intellectual property rights may lead paradoxically to fewer useful products for improving human health.
The paper builds a tractable model of patent pools, agreements among patent owners to license sets of their patents. It provides a necessary and sufficient condition for patent pools to enhance welfare and shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing. The paper allows patents to differ in importance, asymmetric blocking patterns, and licensors to also be licensees. We undertake some initial exploration of the impact of pools on innovation. The analysis has broader applicability than pools, being relevant to a number of co-marketing arrangements.
National surveys of R&D labs across the manufacturing sectors in the US and Japan show that intraindustry R&D knowledge flows and spillovers are greater in Japan than in the US and the appropriability of rents due to innovation less. Patents in particular are observed to play a more central role in diffusing information across rivals in Japan, and appear to be a key reason for greater intraindustry R&D spillovers there, suggesting that patent policy can importantly affect information flows. Uses of patents differ between the two nations, with strategic uses of patents, particularly for negotiations, being more common in Japan. © 2002 Elsevier Science B.V. All rights reserved.
This paper takes stock of the advances and directions for research on the incomplete contracting front. It first illustrates some of the main ideas of the incomplete contract literature through an example. It then offers methodological insights on the standard approach to modeling incomplete contracts; in particular it discusses a tension between two assumptions made in the literature, namely rationality and the existence of transaction costs. Last, it argues that, contrary to what is commonly argued, the complete contract methodology need not be unable to account for standard institutions such as authority and ownership; and it concludes with a discussion of the research agenda.
This paper contributes with empirical findings to European co-inventorship location and geographical coincidence of co-patenting networks. Based on EPO co-patenting information for the reference period 2000-2004, we analyze the spatial con figuration of 44 technology-specific co-inventorship networks. European co-inventorship (co-patenting) activity is spatially linked to 1259 European NUTS3 units (EU25+CH+NO) and their NUTS1 regions by inventor location. We extract 7.135.117 EPO co-patenting linkages from our own relational database that makes use of the OECD RegPAT (2009) files. The matching between International Patent Classification (IPC) subclasses and 44 technology fields is based on the ISI-SPRU-OST-concordance. We con firm the hypothesis that the 44 co-inventorship networks differ in their overall size (nodes, linkages, self-loops) and that they are dominated by similar groupings of regions. The paper offers statistical evidence for the presence of highly localized European co-inventorship networks for all 44 technology fields, as the majority of linkages between NUTS3 units (counties and districts) are within the same NUTS1 regions. Accordingly, our findings helps to understand general presence of positive spatial autocorrelation in regional patent data. Our analysis explicitly accounts for different network centrality measures (betweenness, degree, eigenvector). Spearman rank correlation coefficients for all 44 technology fields confirm that most co-patenting networks co-locate in those regions that are central in several technology-specific co-patenting networks. These findings support the hypothesis that leading European regions are indeed multi- filed network nodes and that most research collaboration is taking place in dense co-patenting networks. --
This paper hypothesizes that, when their products are imperfect substitutes, firms can promote collusion by cross-licensing their competing patents. Cross-licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm's product. The paper then examines the consistency of the theory developed with the available evidence. Antitrust implications of the practice of cross-licensing of competing patents are discussed.
This paper reexamines the issue of optimal patent breadth in extending the earlier literature to the case where many firms race for a patent. It also discusses several examples that suggest the relevance of the nature of competition prevailing in the product market to explain the diverse results found in the literature. Loosely speaking, the less efficient is competition in the product market, the more likely it is that broad and short patents are socially optimal. Copyright 1996 by Blackwell Publishing Ltd.
Public policy analysis of optimal patent regimes is often framed as a tradeoff between static and dynamic efficiency. In this analytical framework, weak patent protection and strict antitrust policy are taken to be directed toward static concerns, while protection of intellectual property through strong patent laws is taken as a reflection of broader social concerns for long-run growth and technological progress. This characterization has some truth, but the magnitude of the conflict between static and dynamic efficiency, can easily be exaggerated. In this article, I want to argue that weak patent protection need not be inimical to economic growth and, conversely, that strong patent protection need not be an enemy of diffusion. Appropriately structured patent law and antitrust rules can together ensure incentives for R&D and also induce cooperation among firms in diffusing R&D results through licensing and other means. At the same time, cooperation among firms at the R&D stage can counterbalance weak patent protection by internalizing spillovers from ongoing R&D programs, and such cooperation may also produce additional spillovers from the existing knowledge.
The relationship between the quality of political institutions and the performance of regulation has recently assumed greater prominence in the policy debate on the effectiveness of infrastructure industry reforms. Taking the view that political accountability is a key factor linking political and regulatory structures and processes, this article empirically investigates its impact on the performance of regulation in telecommunications in time-series--cross-sectional data sets for 29 developing countries and 23 developed countries during 1985--99. In addition to confirming some well-documented results on the positive role of regulatory governance in infrastructure industries, the article provides empirical evidence on the impact of the quality of political institutions and their modes of functioning on regulatory performance. The analysis finds that the impact of political accountability on the performance of regulation is stronger in developing countries. An important policy implication is that future reforms in these countries should give due attention to the development of politically accountable systems. Copyright The Author 2009. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.
When companies decide to engage in technology transfer through exclusive licensing to other firms, they have two basic options: to use standard licensing contracts or to set-up more elaborate partnership-embedded licensing agreements. We find that broader partnership-embedded licensing agreements are preferred with higher levels of technological sophistication of industries, with greater perceived effectiveness of secrecy as a means of appropriability, and when licensors are smaller than their licensees. Innovative differential between companies, innovative supremacy of the licensor and market and technological overlap between partners appear to have no effect on the preference for a particular form of licensing. Copyright 2009 , Oxford University Press.
In several key industries, including semiconductors, biotechnology, computer software, and the Internet, our patent system is creating a patent thicket: an overlapping set of patent rights requiring that those seeking to commercialize new technology obtain licenses from multiple patentees. The patent thicket is especially thorny when combined with the risk of hold-up, namely the danger that new products will inadvertently infringe on patents issued after these products were designed. The need to navigate the patent thicket and hold-up is especially pronounced in industries such as telecommunications and computing in which formal standard-setting is a core part of bringing new technologies to market. Cross-licenses and patent pools are two natural and effective methods used by market participants to cut through the patent thicket, but each involves some transaction costs. Antitrust law and enforcement, with its historical hostility to cooperation among horizontal rivals, can easily add to these transaction costs. Yet a few relatively simple principles, such as the desirability package licensing for complementary patents but not for substitute patents, can go a long way towards insuring that antitrust will help solve the problems caused by the patent thicket and by hold-up rather than exacerbating them.
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