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Firm reputation and incentives to “milk” pending patents

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  • Koenen, Johannes
  • Peitz, Martin

Abstract

In this paper we develop a theory of patenting in which a firm preserves its reputation by only applying for a patent whenever a truly patentable idea has been generated. Firms have a short-run incentive to deviate and receive additional rents from unworthy pending patents, as well as potential rents from PTO mistakes in granting patents. We provide conditions for reputation to be preserved in equilibrium and analyze which market environments are favorable for such an equilibrium to exist. In particular, we analyze the merits of different patent systems.

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  • Koenen, Johannes & Peitz, Martin, 2015. "Firm reputation and incentives to “milk” pending patents," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 18-29.
    • Handle: RePEc:eee:indorg:v:43:y:2015:i:c:p:18-29
    DOI: 10.1016/j.ijindorg.2015.08.002
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    1. Johannes Koenen & Martin Peitz, 2012. "The Economics of Pending Patents," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 3, Edward Elgar Publishing.
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    Cited by:

    1. Comino, Stefano & Graziano, Clara, 2015. "How many patents does it take to signal innovation quality?," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 66-79.
    2. Johannes Koenen & Martin Peitz, 2012. "The Economics of Pending Patents," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 3, Edward Elgar Publishing.
    3. Dietmar Harhoff, 2016. "Patent Quality and Examination in Europe," American Economic Review, American Economic Association, vol. 106(5), pages 193-197, May.
    4. Marco, Alan C. & Sarnoff, Joshua D. & deGrazia, Charles A.W., 2019. "Patent claims and patent scope," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    5. R. John Milne & Brian T. Denton & Troy White, 2015. "ASP, The Art and Science of Practice: How Analytics Practitioners Can Learn from Published Patents and Protect Their Work," Interfaces, INFORMS, vol. 45(3), pages 271-277, June.

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    More about this item

    Keywords

    Pending patents; Reputation; Patent quality; Patent office policy;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • 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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