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Complementarity, Fragmentation, and the Effects of Patent Thickets

  • NAGAOKA Sadao
  • NISHIMURA Yoichiro

This paper empirically investigates the effects of patent thickets. One unique feature of our study is to identify two sources of patent thickets: (1) complementarity as measured by the number of the patents to be used jointly with the focal patent in commercialization, and (2) ownership fragmentation as measured by the number of firms whose patents are cited by an examiner for the granting of the focal patent. There are three major findings. First, there is a significant difference between complex industry sectors and discrete ones regarding complementarity, while the difference regarding fragmentation at the patent level is small. Second, more complementarity is significantly associated with the importance of first mover advantage in research and development (R&D) and (less significantly) with that in commercialization, while fragmentation has little effect on them. Consistent with this finding, complementarity is associated with high patent value. Third, cross licensing motivation significantly accounts for patenting propensity while blocking motivation does not. Complementarity is significantly associated with more patenting for cross licensing, which facilitates both combining the inventions of different firms and preventing the risk of being held up. Furthermore, it does not invite patenting for blocking. Thus, we do not see significantly negative consequences of patent thickets on R&D, as seen by incumbents. At the same time, it is important to pay focus on policy to avoid granting patents to low quality inventions and to facilitate the mechanism of ex-ante contracting in complex industry sectors where patenting motivations are high.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 14001.

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Length: 53 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:eti:dpaper:14001
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  1. Georg Graevenitz & Stefan Wagner & Dietmar Harhoff, 2013. "Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 521-563, 09.
  2. von Graevenitz, Georg & Wagner, Stefan & Harhoff, Dietmar, 2011. "How to measure patent thickets--A novel approach," Economics Letters, Elsevier, vol. 111(1), pages 6-9, April.
  3. 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.
  4. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
  5. Iain M. Cockburn & Megan MacGarvie, 2007. "Patents, Thickets, and the Financing of Early-Stage Firms: Evidence from the Software Industry," NBER Working Papers 13644, National Bureau of Economic Research, Inc.
  6. Aoki, Reiko & Nagaoka, Sadao, 2005. "Coalition Formation for a Consortium Standard Through a Standard Body and a Patent Pool: Theory and Evidence from MPEG2, DVD and 3G," IIR Working Paper 05-01, Institute of Innovation Research, Hitotsubashi University.
  7. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  8. Gilbert, Richard J & Katz, Michael L, 2009. "Efficient Division of Profits from Complementary Innovations," Competition Policy Center, Working Paper Series qt5mr0s11v, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  9. Iain M. Cockburn & Megan J. MacGarvie & Elisabeth Müller, 2010. "Patent thickets, licensing and innovative performance," Industrial and Corporate Change, Oxford University Press, vol. 19(3), pages 899-925, June.
  10. 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 101-28, Spring.
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