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Choosing the scope of trade secret law when secrets complement patents

Author

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  • Ottoz, Elisabetta
  • Cugno, Franco

Abstract

We present a model where an incumbent firm has a proprietary product whose technology consists of at least two components, one of which is patented while the other is kept secret. At the patent expiration date, an entrant firm will enter the market on the same technological footing as the incumbent if it is successful in duplicating, at certain costs, the secret component of the incumbent’s technology. Otherwise, it will enter the market with a production cost disadvantage. We show that under some conditions a broad scope of trade secret law is socially beneficial despite the innovator is over-rewarded.

Suggested Citation

  • Ottoz, Elisabetta & Cugno, Franco, 2010. "Choosing the scope of trade secret law when secrets complement patents," MPRA Paper 20672, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20672
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    References listed on IDEAS

    as
    1. David D. Friedman & William M. Landes & Richard A. Posner, 1991. "Some Economics of Trade Secret Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 61-72, Winter.
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    7. Cugno Franco & Ottoz Elisabetta, 2006. "Trade Secret vs. Broad Patent: The Role of Licensing," Review of Law & Economics, De Gruyter, vol. 2(2), pages 209-221, September.
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    12. Arora, Ashish, 1997. "Patents, licensing, and market structure in the chemical industry," Research Policy, Elsevier, vol. 26(4-5), pages 391-403, December.
    13. Elisabetta Ottoz & Franco Cugno, 2008. "Patent--Secret Mix in Complex Product Firms," American Law and Economics Review, American Law and Economics Association, vol. 10(1), pages 142-158.
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    Citations

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    Cited by:

    1. Crass, Dirk & Garcia Valero, Francisco & Pitton, Francesco & Rammer, Christian, 2016. "Protecting innovation through patents and trade secrets: Determinants and performance impacts for firms with a single innovation," ZEW Discussion Papers 16-061, ZEW - Leibniz Centre for European Economic Research.
    2. Antonelli Cristiano, 2012. "Compulsory licensing: the foundations of an institutional innovation," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201207, University of Turin.
    3. Mario Coccia, 2012. "Path-breaking innovations for lung cancer: a revolution in clinical practice," CERIS Working Paper 201201, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    4. Crass, Dirk & Valero, Francisco Garcia & Pitton, Francesco & Rammer, Christian, 2019. "Protecting Innovation Through Patents and Trade Secrets: Evidence for Firms with a Single Innovation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 26(1), pages 117-156.
    5. David Harper, 2014. "Property rights as a complex adaptive system: how entrepreneurship transforms intellectual property structures," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 335-355, April.
    6. Aineas Kostas Mallios, 2024. "Licensing and secrecy under imperfect intellectual property protection," Theory and Decision, Springer, vol. 97(3), pages 527-552, November.
    7. Sim, Kyoungbo, 2021. "Optimal use of patents and trade secrets for complex innovations," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    8. Paul Belleflamme & Paul Bloch, 2013. "Dynamic Protection of Innovations through Patents and Trade Secrets," CESifo Working Paper Series 4486, CESifo.
    9. Kay, Neil M, 2013. "QWERTY and the search for optimality," SIRE Discussion Papers 2013-103, Scottish Institute for Research in Economics (SIRE).
    10. Neil M Kay, 2013. "QWERTY and the search for optimality," Working Papers 1324, University of Strathclyde Business School, Department of Economics.

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    More about this item

    Keywords

    knowledge spillovers; duplication costs; covenants not to compete; inevitable disclosure;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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