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Fences and competition in patent races

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  • Schneider, Cédric

Abstract

This paper studies the behaviour of firms facing the decision to create a patent fence, defined as a portfolio of substitute patents. 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 fence

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2087.

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Date of creation: 02 Dec 2005
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Handle: RePEc:pra:mprapa:2087

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  1. Shapiro, Carl, 2000. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Competition Policy Center, Working Paper Series qt4hs5s9wk, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  2. Bronwyn H. Hall & Stuart J. H. Graham & Dietmar Harhoff & David C. Mowery, 2004. "Prospects for Improving U.S. Patent Quality via Post-grant Opposition," Law and Economics 0401002, EconWPA.
  3. Bronwyn Hall, 2004. "Exploring the patent explosion," ESRC Centre for Business Research - Working Papers wp291, ESRC Centre for Business Research.
  4. Lerner, Josh & Tirole, Jean, 2003. "Efficient Patent Pools," IDEI Working Papers 211, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Langinier, Corinne, 2005. "Using Patents to Mislead Rivals," Staff General Research Papers 11483, Iowa State University, Department of Economics.
  6. 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.
  7. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  8. 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.
  9. Jensen, R. & Thursby, M., 1994. "Patent Races, Product Standards, and International Competition," Papers 94-015, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  10. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  11. 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.
  12. 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.
  13. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  14. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 249-65, September.
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Cited by:
  1. 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).
  2. Sheng, Li, 2010. "Competing or cooperating to host mega events: A simple model," Economic Modelling, Elsevier, vol. 27(1), pages 375-379, January.
  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. 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.

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