Using renewals in identifying the industries that rely on strategic patenting
1. Using renewals in identifying the
industries that rely on strategic
patenting
Presentation for ΤECHNIS
19-02-2014
K.D
A.P.
2. Traditional motive for patenting
• To commercialize/license an invention unhindered by
competition, i.e. incentives.
• However, patents act as incentives to innovate for the
pharmaceutical and chemical industry only.
• Survey evidence from firm managers shows that in all
other industries firms value firm mover
advantage, trade secrets and technological superiority
more; see Cohen, Nelson and Walsh (2000), Graham et
al. (2009).
• Plus, the majority of innovations in these industries
would have taken place even without of patents;
Bessen and Meurer (2008), Jaffe and Lerner (2011).
3. Puzzle
• If patents are valuable as incentives for only a handful
of industries, why have we recently seen an explosion
of patents that is not restricted to the pharmaceutical
and chemical industry; (Lai et al. 2011) .
• Explanation: changes in the management of
innovation; see Kortum and Lerner (1997).
• Managers realized that patents can be employed in
holding rivals hostage by controlling technology that
they need; see Cohen, Nelson and Walsh
(2000), Reitzig (2004).
• In short, firms also patent for strategic reasons such as
for blocking and negotiating purposes.
4. Problems
• Patents are meant as incentives and not strategic assets.
• Unnecessary monopolies.
• An expansion of the patent landscape burdens innovation
with unwanted uncertainty, and additional monitoring and
litigation costs; Merges (2011).
• These costs, force inventors to protect their technologies
via trade secrets. Lack of disclosure imposes an additional
cost to society; Kitch (1977), Mazzoleni and Nelson (1998).
• Some firms substitute costly R&D activities with strategic
patents as a means to profit; Bessen and Hunt (2007).
5. Our argument
• Strategic patents are prized for the right to
exclude others.
• The legal ability of a patent to exclude does
not depreciate with time. The value of a
technology does depreciate in time.
• On average firms with technologies facing
little depreciation and firms with strategic
patents would be keener to renew them.
6. This argument can explain:
• why patents in industries known to value
patents as a means to profit from the
embodied technology, e.g. pharmaceutical
and chemical patents, have been found as less
likely to be renewed than computers and
communication (or mechanical and
electronics) patents, which are known to offer
limited long-term protection from imitation;
see Bessen (2008), Schankerman (1998).
7. This logic rests on expectations.
• A patentee, prior to renewing, must establish
if the technology can account for the
maintenance fee and the cost of managing a
patent. Since such expectations must depend
on a multitude of parameters (e.g. future
demand, market structure, technological
progress, societal norms, fads, business cycles,
policy changes etc.), relying on renewals in
identifying strategic patents can be
misleading.
8. A natural experiment
• We use a natural experiment that in principle
forces the patentees to reveal their type.
• We check that our findings accord with the
empirical literature.
• Knowing the patentees’ type we follow the
same pool of patentees and look at renewals.
• We find that the patentees that were
identified as relying on strategic patents had a
greater renewal rate.
9. TRIPS
• Before TRIPS the USPTO granted patents for 17
years since the grant date of the patent.
• By implementing TRIPS, the USPTO was obliged
to change its practice and start granting patents
with a patent length equal to 20 years since the
original patent filing date.
• As to facilitate the move to TRIPS, the USPTO
(unexpectedly) allowed applicants who filed
prior to June 8th 1995 a patent length that was
equal to the maximum of the two regimes; i.e. a
possible small extension in patent length.
10. We expect that:
• Applicants with technologies that can find
marketable applications should value the
extension more than applicants who aim to use
the patent in unforeseen and uncertain
bargaining negotiations.
• They should be more likely to file prior to June 8th
1995.
• When renewing their patents this pattern should
reverse and applicants that value the embodied
technology should be less likely to renew.
11. Hypotheses
• H1: industries that have been known to value
patents as incentives should be keener to file
prior to the deadline.
• H2: industries that were not keen to file prior
to the deadline should be eager to renew.
16. Does the Incentive Change by Type of
Application?
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17. How About Renewals?
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