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Using patents to mislead rivals

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  • Corinne Langinier

Abstract

Firms claim they do not rely heavily on patents. Yet they patent, as indicated by the large number of patents that are granted. This paper offers a possible resolution to this puzzle. It takes a simplified version of a duopoly innovation race and studies the patenting decision of an innovator who has private information about the improvability of her innovation. It is shown that a firm may use the patenting decision to mislead her rival. Under symmetric information, research can be stimulated but not disclosed. However, under asymmetric information, disclosure is more likely, even though research incentive may be weakened.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 38 (2005)
Issue (Month): 2 (May)
Pages: 520-545

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Handle: RePEc:cje:issued:v:38:y:2005:i:2:p:520-545

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References

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  1. Choi, Jay Pil, 2001. "Technology transfer with moral hazard," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 249-266, January.
  2. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
  3. Crampes, C. & Langinier, C., 1996. "Information Disclosure in the Renewal of Patents," Papers 96.429, Toulouse - GREMAQ.
  4. Crampes, Claude & Langinier, Corinne, 2002. "Litigation and Settlement in Patent Infringement Cases," Staff General Research Papers 5231, Iowa State University, Department of Economics.
  5. van Dijk, Theon, 1996. "Patent Height and Competition in Product Improvements," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 151-67, June.
  6. Ariel Pakes, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," NBER Working Papers 1340, National Bureau of Economic Research, Inc.
  7. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  8. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Takalo, Tuomas & Kanniainen, Vesa, 2000. "Do patents slow down technological progress?: Real options in research, patenting, and market introduction," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1105-1127, October.
  10. Reiko Aoki & Jin-Li Hu, 1996. "Licensing vs. Litigation: Effect of the Legal System on Incentives to Innovate," Industrial Organization 9612002, EconWPA.
  11. Horstmann, Ignatius & MacDonald, Glenn M & Slivinski, Alan, 1985. "Patents as Information Transfer Mechanisms: To Patent or (Maybe) Not to Patent," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 837-58, October.
  12. Merges, Robert P. & Nelson, Richard R., 1994. "On limiting or encouraging rivalry in technical progress: The effect of patent scope decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 1-24, September.
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Cited by:
  1. Sumitro Banerjee & David A. Soberman, 2013. "Product development capability and marketing strategy for new durable products," ESMT Research Working Papers ESMT-13-01, ESMT European School of Management and Technology.
  2. Rebecca Guidice & G. Alder & Steven Phelan, 2009. "Competitive Bluffing: An Examination of a Common Practice and its Relationship with Performance," Journal of Business Ethics, Springer, vol. 87(4), pages 535-553, July.
  3. Katharine Rockett, 2009. "Property Rights and Invention," Economics Discussion Papers 663, University of Essex, Department of Economics.
  4. Schneider, Cédric, 2008. "Fences and competition in patent races," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1348-1364, November.
  5. Wolfgang Gick, 2004. "Little Firms and Big Patents: The Incentives To Disclose Competencies," Industrial Organization 0411010, EconWPA.

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