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Fences and competition in patent races

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  • Schneider, Cédric

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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Bibliographic 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

Related research

Keywords: Patent fences Intellectual property rights Secrecy Competition;

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References

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  1. 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.
  2. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  3. 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.
  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.
  5. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01.
  6. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  7. 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.
  8. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 249-65, September.
  9. Jensen, Richard & Thursby, Marie, 1996. "Patent Races, Product Standards, and International Competition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 21-49, February.
  10. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  11. 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.
  12. Corinne Langinier, 2005. "Using patents to mislead rivals," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 520-545, May.
  13. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  14. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
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Citations

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Cited by:
  1. Bronwyn H. Hall & Christian Helmers & Mark Rogers & Vania Sena, 2012. "The Choice between Formal and Informal Intellectual Property: A Literature Review," NBER Working Papers 17983, National Bureau of Economic Research, Inc.
  2. BELLELFLAMME, Paul & BLOCH , Francis & ,, 2013. "Dynamic protection of innovations through patents and trade secrets," CORE Discussion Papers 2013059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
  4. Grimpe, Christoph & Hussinger, Katrin, 2014. "Pre-empted patents, infringed patents and firms’ participation in markets for technology," Research Policy, Elsevier, vol. 43(3), pages 543-554.
  5. Sheng, Li, 2010. "Competing or cooperating to host mega events: A simple model," Economic Modelling, Elsevier, vol. 27(1), pages 375-379, January.

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