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Strategic patenting and software innovation

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  • Noel, Michael
  • Schankerman, Mark

Abstract

Strategic patenting is widely believed to raise the costs of innovating, especially in industries characterised by cumulative innovation. This paper studies the effects of strategic patenting on R&D, patenting and market value in the computer software industry. We focus on two key aspects: patent portfolio size which affects bargaining power in patent disputes, and the fragmentation of patent rights (.patent thickets.) which increases the transaction costs of enforcement. We develop a model that incorporates both effects, together with R&D spillovers. Using panel data for the period 1980-99, we find evidence that both strategic patenting and R&D spillovers strongly affect innovation and market value of software firms.

Suggested Citation

  • Noel, Michael & Schankerman, Mark, 2006. "Strategic patenting and software innovation," LSE Research Online Documents on Economics 4653, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:4653
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    File URL: http://eprints.lse.ac.uk/4653/
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    References listed on IDEAS

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    1. Hall, Bronwyn H. & MacGarvie, Megan, 2010. "The private value of software patents," Research Policy, Elsevier, vol. 39(7), pages 994-1009, September.
    2. Hall, Bronwyn H & Ziedonis, Rosemarie Ham, 2001. "The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 101-128, Spring.
    3. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    4. Lerner, Josh & Zhu, Feng, 2007. "What is the impact of software patent shifts? Evidence from Lotus v. Borland," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 511-529, June.
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    Citations

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    Cited by:

    1. Nicolas van Zeebroeck & Bruno van Pottelsberghe de la Potterie, 2011. "The vulnerability of patent value determinants," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(3), pages 283-308.
    2. Philippe Gorry & Diego Useche, 2018. "Orphan Drug Designations as Valuable Intangible Assets for IPO Investors in Pharma-Biotech Companies," NBER Chapters, in: Economic Dimensions of Personalized and Precision Medicine, pages 305-334, National Bureau of Economic Research, Inc.
    3. Alberto Galasso & Mark Schankerman, 2008. "Patent Thickets and the Market for Innovation: Evidence from Settlement of Patent Disputes," CEP Discussion Papers dp0889, Centre for Economic Performance, LSE.
    4. Ajay K. Agrawal & Iain M. Cockburn & Alberto Galasso & Alexander Oettl, 2012. "Why are Some Regions More Innovative than Others? The Role of Firm Size Diversity," NBER Working Papers 17793, National Bureau of Economic Research, Inc.
    5. Galasso, Alberto & Schankerman, Mark, 2008. "Patent Thickets, Judicial Enforcement and the Market for Innovation: Theory and Evidence from Patent Litigation," CEPR Discussion Papers 6946, C.E.P.R. Discussion Papers.
    6. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 315-380, Elsevier.
    7. Blind, Knut & Cremers, Katrin & Mueller, Elisabeth, 2009. "The influence of strategic patenting on companies' patent portfolios," Research Policy, Elsevier, vol. 38(2), pages 428-436, March.
    8. Alberto Galasso & Mark Schankerman, 2010. "Patent thickets, courts, and the market for innovation," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 472-503, September.
    9. Kimberlee Weatherall & Elizabeth Webster, 2014. "Patent Enforcement: A Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 312-343, April.
    10. Agrawal, Ajay & Cockburn, Iain & Galasso, Alberto & Oettl, Alexander, 2014. "Why are some regions more innovative than others? The role of small firms in the presence of large labs," Journal of Urban Economics, Elsevier, vol. 81(C), pages 149-165.
    11. Anne Wyatt, 2008. "What financial and non†financial information on intangibles is value†relevant? A review of the evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 38(3), pages 217-256.

    More about this item

    Keywords

    patents; anti-commons; patent thickets; R&D spillovers; market value;

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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