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Choosing the Scope of Trade Secret Law when Secrets Complement Patents

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  • Ottoz Elisabetta

    ()

  • Cugno Franco

    ()
    (University of Turin)

Abstract

We present a model where an incumbent firm has a proprietary product whose technology consists of at least two components, one of which is patented while the other is kept secret. At the patent expiration date, an entrant firm will enter the market on the same footing as the incumbent if it is successful in duplicating, at certain costs, the secret component of the incumbent’s technology. Otherwise, it will enter the market with a production cost disadvantage. We show that under not too restrictive conditions a broad scope of trade secret law is socially beneficial either the patent length is adjusted in order to grant the innovator the right reward or it is fixed and the innovator is overrewarded

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Bibliographic Info

Paper provided by University of Turin in its series Department of Economics and Statistics Cognetti de Martiis. Working Papers with number 200911.

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Length: 16 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:uto:dipeco:200911

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References

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  1. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  2. Gilbert, R. & Shapiro, C., 1988. "Optimal Patent Length And Breadth," Papers 28, Princeton, Woodrow Wilson School - Discussion Paper.
  3. 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.
  4. Maurer, Stephen M & Scotchmer, Suzanne, 2002. "The Independent Invention Defence in Intellectual Property," Economica, London School of Economics and Political Science, vol. 69(276), pages 535-47, November.
  5. Nisvan Erkal, 2004. "On the Interaction between Patent Policy and Trade Secret Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(4), pages 427-35, December.
  6. Tandon, Pankaj, 1982. "Optimal Patents with Compulsory Licensing," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 470-86, June.
  7. Tuomas Takalo, 1998. "Innovation and imitation under imperfect patent protection," Journal of Economics, Springer, vol. 67(3), pages 229-241, October.
  8. Cugno Franco & Ottoz Elisabetta, 2006. "Trade Secret vs. Broad Patent: The Role of Licensing," Review of Law & Economics, De Gruyter, vol. 2(2), pages 209-221, September.
  9. Elisabetta Ottoz & Franco Cugno, 2008. "Patent--Secret Mix in Complex Product Firms," American Law and Economics Review, Oxford University Press, vol. 10(1), pages 142-158.
  10. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
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Cited by:
  1. David Harper, 2014. "Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 335-355, April.
  2. Neil M Kay, 2013. "QWERTY and the search for optimality," Working Papers 1324, University of Strathclyde Business School, Department of Economics.
  3. 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).
  4. Antonelli Cristiano, 2012. "Compulsory licensing: the foundations of an institutional innovation," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201207, University of Turin.
  5. Mario Coccia, 2012. "Path-breaking innovations for lung cancer: a revolution in clinical practice," CERIS Working Paper 201201, Institute for Economic Research on Firms and Growth - Moncalieri (TO).

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