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  • Carl Shapiro

Abstract

Keywords: patents, innovation, oligopoly JEL codes: L13, O31. ABSTRACT: Many inventions, great and small, are discovered independently at roughly the same time by two or more individuals or organizations. Famous examples include the light bulb (Edison and Swan), the telephone (Bell and Gray), and the integrated circuit (Kilby and Noyce). Such independent invention is common for minor technological improvements. How should property rights to an invention be defined and awarded in such cases? Patent law has struggled with this question for many years. The basic rule in the U.S. is that the patent is awarded to the first firm to invent; later independent inventors come up empty-handed. However, this basic system can create some peculiar results. Suppose that Firm A achieves an invention and files for a patent. Slightly later, but before the invention is made public, Firm B independently discovers the same invention. Firm A receives the patent and can even prevent Firm B from practicing its own invention. In legal terms, a party accused of patent infringement cannot defend itself by showing that it discovered the same invention independently. Would such an independent invention defense be desirable? Alternatively, suppose that Firm A achieves an invention, but decides not to file for a patent, perhaps because Firm A does not believe this invention is sufficiently novel and non-obvious to be patentable. Instead, Firm A uses the invention internally in its own operations as a trade secret. Later, Firm B independently discovers the same invention and files for a patent. Under current U.S. patent law, Firm B is awarded the patent because Firm A kept its invention secret.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 2 (May)
Pages: 92-96

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:2:p:92-96

Note: DOI: 10.1257/000282806777211865
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References

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  1. Gilbert, R. & Shapiro, C., 1988. "Optimal Patent Length And Breadth," Papers 28, Princeton, Woodrow Wilson School - Discussion Paper.
  2. Cabral, Luis, 1994. "Bias in market R&D portfolios," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 533-547, December.
  3. Maurer, Stephen M & Scotchmer, Suzanne, 2002. "The Independent Invention Defence in Intellectual Property," Economica, London School of Economics and Political Science, vol. 69(276), pages 535-47, November.
  4. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
  5. Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-95, September.
  6. Vincenzo Denicolo & Luigi Alberto Franzoni, 2004. "Patents, Secrets, and the First-Inventor Defense," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 517-538, 09.
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Citations

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Cited by:
  1. Jay Pil Choi & Heiko Gerlach, 2011. "Selection Biases in Complementary R&D Projects," CESifo Working Paper Series 3425, CESifo Group Munich.
  2. Zhang, Tianle, 2009. "Patenting in the Shadow of Independent Discoveries by Rivals," MPRA Paper 32917, University Library of Munich, Germany, revised 2011.
  3. Cugno Franco & Ottoz Elisabetta, 2006. "Static Inefficiency of Compulsory Licensing: Quantity vs. Price Competition," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200606, University of Turin.
  4. Paul Belleflamme & Paul Bloch, 2013. "Dynamic Protection of Innovations through Patents and Trade Secrets," CESifo Working Paper Series 4486, CESifo Group Munich.
  5. ICHIDA Toshihiro, 2013. "Imitation versus Innovation Costs: Patent policies under common patent length," Discussion papers 13054, Research Institute of Economy, Trade and Industry (RIETI).
  6. Banerjee, Dyuti & Chatterjee, Ishita, 2010. "The impact of piracy on innovation in the presence of technological and market uncertainty," Information Economics and Policy, Elsevier, vol. 22(4), pages 391-397, December.
  7. Carlos J. POnce, 2007. "More secrecy... more knowledge disclosure? : On disclosure outside of patents," Economics Working Papers we077241, Universidad Carlos III, Departamento de Economía.
  8. Klaus Kultti & Tuomas Takalo & Juuso Toikka, 2006. "Simultaneous Model of Innovation, Secrecy, and Patent Policy," American Economic Review, American Economic Association, vol. 96(2), pages 82-86, May.
  9. Jay Pil Choi & Heiko Gerlach, 2013. "A Theory of Patent Portfolios," CESifo Working Paper Series 4405, CESifo Group Munich.

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