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Patent Thicket, Secrecy, and Licensing

Author

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  • Illoong Kwon

    (Seoul National University)

Abstract

This paper considers a patent portfolio race where firms compete for complementary patents, called a patent thicket. When firms have an option to keep their innovation secret, this paper shows that there exists an equilibrium where firms’ patent propensity is strictly between zero and one. In such an equilibrium, stronger patent protection reduces the firms’ investment in innovation. Moreover, this result does not change even when a licensing contract is feasible.

Suggested Citation

  • Illoong Kwon, 2012. "Patent Thicket, Secrecy, and Licensing," Korean Economic Review, Korean Economic Association, vol. 28, pages 27-49.
  • Handle: RePEc:kea:keappr:ker-20120630-28-1-02
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    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20120630-28-1-02.pdf
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    References listed on IDEAS

    as
    1. Sakakibara, Mariko & Branstetter, Lee, 2001. "Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 77-100, Spring.
    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. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 113-130, Spring.
    4. Schneider, Cédric, 2008. "Fences and competition in patent races," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1348-1364, November.
    5. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March.
    6. Illoong Kwon, 2012. "Patent Races with Secrecy," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 499-516, September.
    7. 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 837-858, October.
    8. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented? empirical estimates for European firms," Research Policy, Elsevier, vol. 27(2), pages 127-141, June.
    9. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    10. 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. Crass, Dirk & Garcia Valero, Francisco & Pitton, Francesco & Rammer, Christian, 2016. "Protecting innovation through patents and trade secrets: Determinants and performance impacts for firms with a single innovation," ZEW Discussion Papers 16-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    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).

    More about this item

    Keywords

    Patent Thicket; Secrecy; Licensing;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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