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Fences and competition in patent races

  • Schneider, Cédric

This paper studies the behaviour of firms facing the decision to create a patent fence, defined as a portfolio of substitute patents. We set up a patent race model, where firms can decide either to patent their inventions, or to rely on secrecy. It is shown that firms build patent fences, when the duopoly profits net of R&D costs are positive. We also demonstrate that in this context, a firm will rely on secrecy when the speed of discovery of the subsequent invention is high compared to the competitor�s. Furthermore, we compare the model under the First-to-Invent and First-to-File legal rules. Finally, we analyze the welfare implications of patent fence

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2087.

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Date of creation: 02 Dec 2005
Date of revision:
Handle: RePEc:pra:mprapa:2087
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  1. Jensen, Richard & Thursby, Marie, 1996. "Patent Races, Product Standards, and International Competition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 21-49, February.
  2. Langinier, Corinne, 2005. "Using Patents to Mislead Rivals," Staff General Research Papers 11483, Iowa State University, Department of Economics.
  3. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  4. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  5. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
  6. Bronwyn H. Hall & Stuart J. H. Graham & Dietmar Harhoff & David C. Mowery, 2004. "Prospects for Improving U.S. Patent Quality via Post-grant Opposition," Law and Economics 0401002, EconWPA.
  7. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01.
  8. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  9. Denicolo, Vincenzo, 1996. "Patent Races and Optimal Patent Breadth and Length," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 249-65, September.
  10. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
  11. 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.
  12. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
  13. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-23, December.
  14. Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring.
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