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Big patents, small secrets: how firms protect inventions when R&D outcome is heterogeneous

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  • Malte Mosel

Abstract

Patents have long been regarded as the ‘gold standard’ of intellectual property protection. In “Little patents and big secrets: managing intellectual property”, Anton and Yao (2004) call this traditional view into question by finding that firms keep their most important innovations secret. This model modifies key assumptions made by Anton and Yao by accounting for patenting costs, patentability standards, and the fact that patents provide protection in competitive situations where secrecy fails. The latter aspect counteracts the empirically substantiated fact that, in situations where both appropriation mechanisms are applicable, secrecy provides more protection. It is found that firms keep small inventions secret, use both mechanisms for medium inventions, and patent their most important innovations. This result reestablishes the traditional view that patents are crucial to provide R&D incentives and is yet consistent with main empirical findings on the issue.

Suggested Citation

  • Malte Mosel, 2011. "Big patents, small secrets: how firms protect inventions when R&D outcome is heterogeneous," Working Papers 105, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:105_mosel
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    File URL: http://www.bgpe.de/texte/DP/105_Mosel.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Vivek Ghosal & Jiayao Ni, 2015. "Competition and Innovation in Automobile Markets," CESifo Working Paper Series 5504, CESifo Group Munich.

    More about this item

    Keywords

    Heterogeneous inventions; innovation size; intellectual property rights; patents; patent filing fees; patentability standards; renewal fees; secrecy; technology evolution;

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • 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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