Patent Protection, Takeovers, and Startup Innovation: A Dynamic Approach
The impact of IP protection on the innovation incentives of startup firms is examined in a dynamic model where an incumbent faces a sequence of potential startups and the incumbent's chance of winning an infringement lawsuit increases with the size of its patent portfolio. It is shown that takeover deals generate extra benefits for the incumbent via its enhanced future bargaining positions, a part of which accrues to the current startup as an increased bargaining share. This increased bargaining share can be large enough to justify the startup's innovation activity that would not have taken place otherwise. This effect may be greatest under moderate levels of IP protection, because the increase in the bargaining share, being proportional to the marginal benefits brought by the last patent added to the portfolio, would be too small if the protection was too weak while it would taper off too quickly if the protection was excessive.
|Date of creation:||May 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 0117 33 10799
Fax: 0117 33 10705
Web page: http://www.bris.ac.uk/cmpo/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
- Gerard Llobet & Hugo Hopenhayn & Matthew F. Mitchell, 2000.
"Rewarding sequential innovators: prizes, patents and buyouts,"
273, Federal Reserve Bank of Minneapolis.
- Hugo Hopenhayn & Gerard Llobet & Matthew Mitchell, 2006. "Rewarding Sequential Innovators: Prizes, Patents, and Buyouts," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1041-1068, December.
- Gerard Llobet & Hugo Hopenhayn & Matthew Mitchell, 2003. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Levine's Working Paper Archive 618897000000000682, David K. Levine.
- Llobet, G. & Hopenhayn, H. & Mitchell, M., 2000. "Rewarding Sequential Innovators: Prizes, Patents and Buyouts," Papers 0012, Centro de Estudios Monetarios Y Financieros-.
- Graham, Stuart J.H. & Harhoff, Dietmar, 2006.
"Can Post-Grant Reviews Improve Patent System Design? A Twin Study of US and European Patents,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
38, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Graham, Stuart J.H. & Harhoff, Dietmar, 2006. "Can Post-Grant Reviews Improve Patent System Design? A Twin Study of US and European Patents," CEPR Discussion Papers 5680, C.E.P.R. Discussion Papers.
- Llobet, Gerard, 2003. "Patent litigation when innovation is cumulative," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1135-1157, October.
- Choi, J.P., 1997.
"Patent Litigation as an Information Transmission Mechanism,"
1997-17, Tilburg University, Center for Economic Research.
- Choi, Jay Pil, 1998. "Patent Litigation as an Information-Transmission Mechanism," American Economic Review, American Economic Association, vol. 88(5), pages 1249-63, December.
- Mark A. Lemley & Carl Shapiro, 2005.
Journal of Economic Perspectives,
American Economic Association, vol. 19(2), pages 75-98, Spring.
- Harhoff, Dietmar & Reitzig, Markus, 2004.
"Determinants of opposition against EPO patent grants--the case of biotechnology and pharmaceuticals,"
International Journal of Industrial Organization,
Elsevier, vol. 22(4), pages 443-480, April.
- Harhoff, Dietmar & Reitzig, Markus, 2002. "Determinants of Opposition Against EPO Patent Grants - The Case of Biotechnology and Pharmaceuticals," CEPR Discussion Papers 3645, C.E.P.R. Discussion Papers.
- Ted O'Donoghue & Suzanne Scotchmer & Jacques-François Thisse, 1998.
"Patent Breadth, Patent Life, and the Pace of Technological Progress,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 7(1), pages 1-32, 03.
- O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Panayotis Dessyllas & Alan Hughes, 2005. "R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries," Industrial Organization 0507008, EconWPA.
- James Bessen & Michael J. Meurer, 2005. "The Patent Litigation Explosion," Working Papers 0501, Research on Innovation.
When requesting a correction, please mention this item's handle: RePEc:bri:cmpowp:08/201. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.