A Study of Patent Thickets

This report analyses whether entry of UK enterprises into patenting in a technology area is affected by patent thickets in the technology area. The aim is to contribute to our understanding of the role of patent thickets as a barrier to entry into patenting for UK enterprises, in particular small and medium sized enterprises (SMEs). To do this we review the literature on patent thickets, discuss factors contributing to thicket formation and growth, and evaluate to what extent patent thickets might be considered to be barriers to entry in some technology areas. We also summarize the limited existing empirical evidence regarding effects of patent thickets on R&D investments and competition. We find overwhelming evidence in the literature that patent thickets arise in specific technology areas. This conclusion is based on a comprehensive review of the empirical literature on patent thickets of the last 15 years. This literature consists of surveys of firm representatives as well as of econometric analyses of firm level data. The literature on thickets contains more than 100 peer reviewed papers and a number of extensive studies undertaken by competition regulators. Our main contribution in this study consists of an empirical analysis of the effects of patent thickets at the European Patent Office on entry into patenting by UK firms. Using a new measure of patent thickets developed by Graevenitz et al. (2012), the report provides a descriptive analysis of the growth of patent thickets in the European patent system and an analysis of the exposure to these thickets of UK entrants into patenting. Econometric analysis of the probability of entry into patenting by technology area shows that the density of a patent thicket is associated with reduced entry into patenting in the technology area in the data set used for this study. We discuss limitations of the data used and suggest how further work might test the reliability of our findings.