Fences and competition in patent races

Schneider, Cédric (2005): Fences and competition in patent races. Unpublished.

Abstract

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

• Item Type: MPRA Paper
• Institution: CEBR, Copenhagen Business School
• Language: English
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General; O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O34 - Intellectual Property Rights: National and International Issues