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Fences and competition in patent races

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Author Info
Schneider, Cédric

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Abstract

This paper studies the behavior of firms facing the decision to create a patent fence, defined as a patent portfolio of substitutable technologies. We set up a patent race model, where firms can decide either to patent their inventions, or to rely on secrecy. It is shown that firms build patent fences, when the duopoly profits net of R&D costs are positive. We also demonstrate that in this context, a firm will rely on secrecy when the speed of discovery of the subsequent invention is high compared to the competitor's. Furthermore, we compare the model under the First-to-Invent and First-to-File legal rules. Finally, we analyze the welfare implications of patent fences.

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File URL: http://www.sciencedirect.com/science/article/B6V8P-4RR1NKK-1/2/0a172040d6311c1d72014c3cbf10ab84
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Publisher Info
Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 26 (2008)
Issue (Month): 6 (November)
Pages: 1348-1364
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Handle: RePEc:eee:indorg:v:26:y:2008:i:6:p:1348-1364

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Web page: http://www.elsevier.com/locate/inca/505551

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Related research
Keywords: Patent fences Intellectual property rights Secrecy Competition;

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References listed on IDEAS
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  1. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Blackwell Publishing, vol. 44(3), pages 249-65, September. [Downloadable!] (restricted)
  2. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Blackwell Publishing, vol. 34(2), pages 217-23, December. [Downloadable!] (restricted)
  3. Richard A. Jensen & Marie Thursby, 1996. "Patent Races, Product Standards, and International Competition," NBER Working Papers 3870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring. [Downloadable!] (restricted)
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  5. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June. [Downloadable!]
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  6. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring. [Downloadable!] (restricted)
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  7. Bronwyn H. Hall & Stuart J.H. Graham & Dietmar Harhoff, 2003. "Prospects for Improving U.S. Patent Quality via Post-grant Opposition," NBER Working Papers 9731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. 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. [Downloadable!] (restricted)
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  9. Langinier, Corinne, 2004. "Using patents to mislead rivals," Staff General Research Papers 11483, Iowa State University, Department of Economics.
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  10. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01. [Downloadable!]
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  11. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring. [Downloadable!] (restricted)
  12. Samuel Kortum & Josh Lerner, 1997. "Stronger Protection or Technological Revolution: What is Behind the Recent Surge in Patenting?," NBER Working Papers 6204, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. 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. [Downloadable!] (restricted)
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