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Patent Thickets: Strategic Patenting of Complex Technologies

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  • James Bessen

    (Research on Innovation, Boston University School of Law)

Abstract

Patent race models assume that an innovator wins the only patent covering a product. But when technologies are complex, this property right is defective: ownership of a product’s technology is shared, not exclusive. In that case I show that if patent standards are low, firms build “thickets” of patents, especially incumbent firms in mature industries. When they assert these patents, innovators are forced to share rents under cross-licenses, making R&D incentives sub-optimal. On the other hand, when lead time advantages are significant and patent standards are high, firms pursue strategies of “mutual non-aggression.” Then R&D incentives are stronger, even optimal.

Suggested Citation

  • James Bessen, 2004. "Patent Thickets: Strategic Patenting of Complex Technologies," Working Papers 0401, Research on Innovation.
    • Handle: RePEc:roi:wpaper:0401
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    File URL: http://www.researchoninnovation.org/thicket.pdf
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    References listed on IDEAS

    as
    1. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    2. James Bessen & Robert M. Hunt, 2007. "An Empirical Look at Software Patents," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 157-189, March.
    3. 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.
    4. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March.
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    Citations

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    Cited by:

    1. Robert M. Hunt, 2006. "When Do More Patents Reduce R&D?," American Economic Review, American Economic Association, vol. 96(2), pages 87-91, May.
    2. Georg Graevenitz & Stefan Wagner & Dietmar Harhoff, 2013. "Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 521-563, September.
    3. Alexandre Almeida & Aurora A.C. Teixeira, 2007. "Does Patenting negatively impact on R&D investment?An international panel data assessment," FEP Working Papers 255, Universidade do Porto, Faculdade de Economia do Porto.
    4. 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.
    5. Antonelli, Cristiano, 2003. "The Governance of Technological Knowledge: Strategies, Processes and Public Policies," 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 200306, University of Turin.
    6. van Zeebroeck, Nicolas & van Pottelsberghe de la Potterie, Bruno & Guellec, Dominique, 2009. "Claiming more: the Increased Voluminosity of Patent Applications and its Determinants," Research Policy, Elsevier, vol. 38(6), pages 1006-1020, July.
    7. Sebastian von Engelhardt & Sushmita Swaminathan, 2008. "Open Source Software, Closed Source Software or Both: Impacts on Industry Growth and the Role of Intellectual Property Rights," Discussion Papers of DIW Berlin 799, DIW Berlin, German Institute for Economic Research.
    8. Yann Ménière & Sarah Parlane, 2008. "Innovation in the Shadow of Patent Litigation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 95-111, March.
    9. James Bessen & Robert M. Hunt, 2004. "The software patent experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 22-32.
    10. Justus Baron & Henry Delcamp, 2012. "The private and social value of patents in discrete and cumulative innovation," Scientometrics, Springer;Akadémiai Kiadó, vol. 90(2), pages 581-606, February.
    11. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2022. "Assessing the Impact of Patent Attributes on the Value of Discrete and Complex Innovations," Papers 2208.07222, arXiv.org.
    12. Miller, David A., 2008. "Invention under uncertainty and the threat of ex post entry," European Economic Review, Elsevier, vol. 52(3), pages 387-412, April.
    13. Mohd Shadab Danish & Pritam Ranjan & Ruchi Sharma, 2021. "Identification of “Valuable” Technologies via Patent Statistics in India: An Analysis Based on Renewal Information," BASE University Working Papers 13/2021, BASE University, Bengaluru, India.
    14. Yann Ménière & Sarah Parlane, 2004. "A Dynamic Model of Cross Licensing," Working Papers 200424, School of Economics, University College Dublin.
    15. Po-Hsuan Hsu & Hsiao-Hui Lee & Tong Zhou, 2022. "Patent Thickets, Stock Returns, and Conditional CAPM," Management Science, INFORMS, vol. 68(11), pages 8343-8367, November.
    16. Jeroen de Jong & Eric von Hippel, 2010. "Open, distributed and user-centered: Towards a paradigm shift in innovation policy," Scales Research Reports H201009, EIM Business and Policy Research.

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