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Dynamic Protection of Innovations through Patents and Trade Secrets

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  • Paul Belleflamme
  • Paul Bloch

Abstract

This paper analyzes the optimal protection strategy for an innovator of a complex innovation who faces the risk of imitation by a competitor. We suppose that the innovation can be continuously fragmented into sub-innovations. We characterize the optimal mix of patent and trade secrets when the innovator faces a strict novelty requirement and can only patent a fraction of the innovation once. We also study the optimal dynamic patenting policy in a soft novelty regime, when the innovator can successively patent different fragments of the process. We compare a regime with prior user rights, when the innovator can use the secret part of the process, even when it is patented by an imitator with a regime without prior user rights.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-11/cesifo1_wp4486.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4486.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4486

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Keywords: patents; trade secrets; dynamic protection of innovation; intellectual property rights;

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  1. Hussinger, Katrin, 2004. "Is Silence Golden? Patents versus Secrecy at the Firm Level," ZEW Discussion Papers 04-78, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. 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.
  3. 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.
  4. Mark A. Lemley & Carl Shapiro, 2005. "Probabilistic Patents," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 75-98, Spring.
  5. Carl Shapiro, 2006. "Prior User Rights," American Economic Review, American Economic Association, vol. 96(2), pages 92-96, May.
  6. Ottoz, Elisabetta & Cugno, Franco, 2011. "Choosing the scope of trade secret law when secrets complement patents," International Review of Law and Economics, Elsevier, vol. 31(4), pages 219-227.
  7. Schneider, Cédric, 2008. "Fences and competition in patent races," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1348-1364, November.
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  15. 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.
  16. Arora, Ashish, 1997. "Patents, licensing, and market structure in the chemical industry," Research Policy, Elsevier, vol. 26(4-5), pages 391-403, December.
  17. David D. Friedman & William M. Landes & Richard A. Posner, 1991. "Some Economics of Trade Secret Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 61-72, Winter.
  18. Nigar Hashimzade & Jean Hindriks & Gareth D. Myles, 2006. "Solutions Manual to Accompany Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582694, December.
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