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A Theory of Patent Portfolios

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  • Jay Pil Choi
  • Heiko Gerlach

Abstract

This paper develops a theory of patent portfolios in which firms accumulate an enormous amount of related patents, which makes it impractical to develop new products that avoid inadvertent infringement. We show that patent peace arises if product market competition is weak and patent portfolios are either sufficiently weak or sufficiently strong with comparable size. An increase in one firm's patent portfolio reduces the innovation incentives of its rivals but does not necessarily increase its own. Firms with larger patent portfolios have stronger incentives to acquire additional patents, while consumers may be better off if firms with weaker portfolios acquire them.

Suggested Citation

  • Jay Pil Choi & Heiko Gerlach, 2017. "A Theory of Patent Portfolios," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 315-351, February.
    • Handle: RePEc:aea:aejmic:v:9:y:2017:i:1:p:315-51
    Note: DOI: 10.1257/mic.20150003
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    Cited by:

    1. Jay Pil Choi & Heiko Gerlach, 2018. "A Model Of Patent Trolls," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(4), pages 2075-2106, November.
    2. Carlo Capuano & Iacopo Grassi & Riccardo Martina, 2020. "Patent protection and threat of litigation in oligopoly," Journal of Economics, Springer, vol. 130(2), pages 109-131, July.
    3. Gabrovski, Miroslav, 2017. "Coordination Frictions and Economic Growth," MPRA Paper 81298, University Library of Munich, Germany, revised 17 Jul 2017.
    4. Norbäck Pehr-Johan & Persson Lars & Olofsson Charlotta, 2020. "Acquisitions for Sleep," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-13, April.
    5. Jay Pil Choi & Heiko Gerlach, 2017. "A Theory of Patent Portfolios," American Economic Journal: Microeconomics, American Economic Association, vol. 9(1), pages 315-351, February.
    6. Bar, Talia & Kalinowski, Jesse, 2019. "Patent validity and the timing of settlements," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    7. Antonin Bergeaud & Julia Schmidt & Riccardo Zago, 2022. "Patents that match your standards: firm-level evidence on competition and innovation," CEP Discussion Papers dp1881, Centre for Economic Performance, LSE.
    8. Choi, Jay Pil & Gerlach, Heiko, 2019. "Optimal cross-licensing arrangements: Collusion versus entry deterrence," European Economic Review, Elsevier, vol. 120(C).
    9. Stefano Comino & Fabio M. Manenti, 2022. "Patent portfolios and firms’ technological choices," Journal of Economics, Springer, vol. 137(2), pages 97-120, October.
    10. Bergeaud Antonin & Schmidt Julia & Zago Riccardo, 2022. "Patents that Match your Standards: Firm-level Evidence on Competition and Growth," Working papers 876, Banque de France.
    11. Kwon, Seokbeom & Marco, Alan C., 2021. "Can antitrust law enforcement spur innovation? Antitrust regulation of patent consolidation and its impact on follow-on innovations," Research Policy, Elsevier, vol. 50(9).
    12. He, Leshui, 2020. "A theory of pre-filing settlement and patent assertion entities," International Journal of Industrial Organization, Elsevier, vol. 70(C).

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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