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Using Patents to Mislead Rivals

  • Langinier, Corinne

Recent surveys report that firms claim they do not rely heavily on patents in order to appropriate a return on their innovation. Yet, firms do patent, as indicated by the large number of patents that are granted. This paper offers a possible resolution to this puzzle. It takes a simplified version of a duopoly innovation race, and studies the patenting decision of an innovator who has private information about the improvability of her innovation. In this setting, it is shown that a firm may use the patenting decision to mislead her rival. Under symmetric information, research can be stimulated but not disclosed. However, under asymmetric information, disclosure is more likely even though the incentive to do research may be weakened.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/p5076-2004-03-04.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 11483.

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Date of creation: 01 Jan 2005
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Publication status: Published in Canadian Journal of Economics 2005, vol. 38 no. 2, pp. 520-545
Handle: RePEc:isu:genres:11483
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. 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).
  2. 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.
  3. Crampes, C. & Langinier, C., 1996. "Information Disclosure in the Renewal of Patents," Papers 96.429, Toulouse - GREMAQ.
  4. van Dijk, Theon, 1996. "Patent Height and Competition in Product Improvements," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 151-67, June.
  5. Horstmann, Ignatius & MacDonald, Glenn M & Slivinski, Alan, 1985. "Patents as Information Transfer Mechanisms: To Patent or (Maybe) Not to Patent," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 837-58, October.
  6. Choi, J.P., 1995. "Technology Transfer with Moral Hazard," Discussion Papers 1995_16, Columbia University, Department of Economics.
  7. Ariel Pakes, 1986. "Patents as Options: Some Estimates of the Value of Holding European Patent Stocks," NBER Working Papers 1340, National Bureau of Economic Research, Inc.
  8. Crampes, Claude & Langinier, Corinne, 2002. "Litigation and Settlement in Patent Infringement Cases," Staff General Research Papers 5231, Iowa State University, Department of Economics.
  9. Takalo, Tuomas & Kanniainen, Vesa, 2000. "Do patents slow down technological progress?: Real options in research, patenting, and market introduction," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1105-1127, October.
  10. Reiko Aoki & Jin-Li Hu, 1996. "Licensing vs. Litigation: Effect of the Legal System on Incentives to Innovate," Industrial Organization 9612002, EconWPA.
  11. Merges, Robert P. & Nelson, Richard R., 1994. "On limiting or encouraging rivalry in technical progress: The effect of patent scope decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 1-24, September.
  12. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
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