IDEAS home Printed from https://ideas.repec.org/p/hal/cesptp/halshs-00740716.html
   My bibliography  Save this paper

Dysfunctions of the patent system and their effects on competition

Author

Listed:
  • David Encaoua

    () (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne)

  • Thierry Madiès

    (Department of Economics - University of Fribourg - University of Fribourg)

Abstract

In this paper the authors argue that the contemporary tensions between patents and competition no longer reside in the traditional trade-off between the exclusionary right given to an inventor to encourage innovation, and the welfare loss induced by the market power associated to this right. They rather consider that the three following distortions of the patent system create important conflicts between patents and competition on the product market, the technology market, and the innovation market. The first distortion concerns the existence of dubious or weak patents. Too many patents are granted to applications of bad quality, in terms of the usual patentability criteria. This increases the uncertainty attached to patents, reduces the credibility of the system and calls into question the justification of the patent as a protective mechanism. Second, the configuration of a patent, originally designed in the context of an isolated innovation, is not adapted to the context of sequential or intergenerational innovations, in which an innovation relies on earlier patented inventions. Even though sequential innovation calls for fine delimitations between successive generations of innovators, the strengthening of intellectual property, including the extension of the patentable subject matters opened the door to opportunistic behavior and adversely affected the needed flexibility to favor technological exchanges. Third, the emergence of complex technologies, in which the use of a large number of fragmented patents is necessary to produce a new product, implies the necessity to coordinate the various patent holders' behavior. The potential entrants in these complex technologies are struck by the coordinated behavior of the patent holders, and this is illustrated in different settings such as the pooling of complementary patents and the licensing of essential patents by the members of a Standard Setting Organization. Very often, patents serve to create ambushes or to capture unjustified rents through excessive license fees, which in turn create barriers to entry for new competitors in the innovation market. Two important consequences of these distorsions are derived. On the one hand, the resolution of these conflicts cannot rely exclusively on the application of the antitrust law. Even if these distortions seriously affect competition in the three markets of products, technology and innovation, antitrust rules are unable to resolve the specific effects rose from distortions of the contemporary patent system. On the other hand, the existence of these distortions leads to a very expensive judicial implementation of the patent system. The multiplication of the conflicts due to a strategic use of patents, particularly in the information and communication technology, in biotechnology and medicine raises the question of the adaptation of the legal status of patents to the contemporary technological developments.

Suggested Citation

  • David Encaoua & Thierry Madiès, 2012. "Dysfunctions of the patent system and their effects on competition," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00740716, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00740716
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00740716
    as

    Download full text from publisher

    File URL: https://halshs.archives-ouvertes.fr/halshs-00740716/document
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bruno van Pottelsberghe de la Potterie, 2011. "The quality factor in patent systems," Industrial and Corporate Change, Oxford University Press, vol. 20(6), pages 1755-1793, December.
    2. Langinier, Corinne & Marcoul, Phillipe, 2009. "Search of Prior Art and Revelation of Information by Patent Applicants," Working Papers 2009-21, University of Alberta, Department of Economics.
    3. 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.
    4. Anne Layne-Farrar & Gerard Llobet & Jorge Padilla, 2014. "Payments and Participation: The Incentives to Join Cooperative Standard Setting Efforts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 24-49, March.
    5. Deepak Hegde & David C. Mowery & Stuart Graham, 2007. "Pioneers, Submariners, or Thicket-builders: Which Firms Use Continuations in Patenting?," NBER Working Papers 13153, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stefano Comino & Fabio Maria Manenti, 2015. "Intellectual Property and Innovation in Information and Communication Technology (ICT)," JRC Working Papers JRC97541, Joint Research Centre (Seville site).

    More about this item

    Keywords

    droit probabiliste; arrangement à l'amiable; innovation séquentielle; pools de brevets; organisme de standardisation technologique.; probabilistic right; private settlement; sequential innovation; patent pools; technological standard setting organization.;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00740716. 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: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.