VonGraevenitz (2012) - Incidence And Growth Of Patent Thickets

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Reference

• von Graevenitz, G., Wagner, S. and Harhoff, D. (2012), "Incidence and Growth of Patent Thickets-The Impact of Technological Opportunities and Complexity", Journal of Industrial Economics

@article{von2012incidence,
  title={Incidence and Growth of Patent Thickets-The Impact of Technological Opportunities and Complexity},
  author={von Graevenitz, G. and Wagner, S. and Harhoff, D.},
  journal={Journal of Industrial Economics},
  year={2012},
  abstract={We investigate incidence and evolution of patent thickets. Our empirical analysis is based on a theoretical model of patenting in complex and discrete technologies. The model captures how competition for patent portfolios and complementarity of patents affect patenting incentives. We show that lower technological opportunities increase patenting incentives in complex technologies while they decrease incentives in discrete technologies. Also, more competitors increase patenting incentives in complex technologies and reduce them in discrete technologies. To test these predictions a new measure of the density of patent thickets is introduced. European patent citations are used to construct measures of fragmentation and technological opportunity. Our empirical analysis is based on a panel capturing patenting behavior of 2074 firms in 30 technology areas over 15 years. GMM estimation results confirm the predictions of our theoretical model. The results show that patent thickets exist in 9 out of 30 technology areas. We find that decreased technological opportunities are a surprisingly strong driver of patent thicket growth.},
  discipline={Econ},
  research_type={Empirical},
  industry={},
  thicket_stance={},
  thicket_stance_extract={},
  thicket_def={},
  thicket_def_extract={},  
  tags={},
  filename={vonGraevenitz (2012) - Incidence And Growth Of Patent Thickets.pdf}
}

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Abstract

We investigate incidence and evolution of patent thickets. Our empirical analysis is based on a theoretical model of patenting in complex and discrete technologies. The model captures how competition for patent portfolios and complementarity of patents affect patenting incentives. We show that lower technological opportunities increase patenting incentives in complex technologies while they decrease incentives in discrete technologies. Also, more competitors increase patenting incentives in complex technologies and reduce them in discrete technologies. To test these predictions a new measure of the density of patent thickets is introduced. European patent citations are used to construct measures of fragmentation and technological opportunity. Our empirical analysis is based on a panel capturing patenting behavior of 2074 firms in 30 technology areas over 15 years. GMM estimation results confirm the predictions of our theoretical model. The results show that patent thickets exist in 9 out of 30 technology areas. We find that decreased technological opportunities are a surprisingly strong driver of patent thicket growth.

Review

Measures of Patent Thicket

Patent thickets are measured with two variables:

• "Triples" to reflect patent thicket blocking/hold-up potential associated with complexity of technological inputs to a firm's products, measured by mutual references between patents of at least three firms in a technology area;
• Fragmentation of patents across firms cited as critical references (X and Y references that limit patentability of a patent) by a given firm's patents in a given technology area.

Sample

173,448 year/technology/firm observations on 2,074 firms with European patents in 30 technology areas from 1988-2002.

• European patents information from the European Patent Office's PATSTAT database provides citations data between 1987 and 2002;
• Firms for analysis restricted to those with at least 100 patent applications and at least 3 years of patent applications in a technology area after 1987.

Results

• Greater technological opportunities (more non-patent references) raises patenting significantly with coefficient of 1.553.
• Complexity of patents in a technology area ("triples") affects patenting differently in simple vs. complex technologies:
  • Increasing technological opportunities reduce patenting in complex technology areas (the interaction of technological opportunity and Triples has a significantly negative coefficient of -.036);
  • Increasing complexity ("triples) in simpler technology areas increases patenting, (the straight triples coefficient is significantly positive 0.005, and represents effect of complexity for simpler technologies since the above interation of technological opportunity and triples leaves simpler technologies as the reference group);
  • Also, significant negative interactions between triples and lagged dependent variables for patenting indicates that persistence in patenting is absent for more complex technology areas:

"This shows that patentees area more responsive to their competitors' patenting behavior and to technological opportunity in complex technology areas than in discrete technology areas."

• Fragmentation of the ownership of technology, which authors view as indicating greater competition, significantly reduces patenting efforts, -0.474.

Social Welfare Consequences

"We show theoretically that greater technological opportunity will raise patenting in discrete technologies but will lower it as technologies become increasingly complex [as captured by triples]. Additionally, we show that greater competition in R&D raises firms’ patenting levels in complex technologies. To test our model we derive a new measure of complexity of blocking relationships in patent thickets [triples]. This measure exploits information on critical references to capture mutual blocking between the patent portfolios of firms contained in European patent data. Using the measure we are able to confirm that blocking is a much more serious problem in technology areas previously identified as complex than in those previously identified as discrete."

"Using data on patenting in Europe and these measures,...increased technological opportunity during the early 1990’s counteracted the effects of growing complexity and retarded the onset of the patenting explosion observable after 1994. The patent explosion coincides with the decrease in technological opportunities after 1994."

Dependent Variable and Model

The dependent variable is the (log of the) number of patent filings by a firm in a given year in a given technology area.

• Models are estimated by GMM to account for "endogeneity" of lagged patent counts (where instruments are lagged values of potentially endogeneous variables).
• Explanatory variables are:
  • "Triples" to reflect patent thicket hold up potential associated with complexity of technological inputs to a firm's products, measured by mutual references between patents of at least three firms in a technology area;
  • Fragmentation of patents across firms cited as critical references (X and Y references that limit patentability of a patent) by a given firm's patents in a given technology area;
  • Technological opportunity, measured by the average number of non-patent literature references (NPR) in the search report of patents in a technology area;
  • Technological diversity of the firm, measured by the number of technology areas with at least one patent application in a given year;
  • Firm size indicator, reflecing whether the firm is in the upper half of the distribution of the number of patents in a technology area;
  • Indicators for technology areas and years;
  • Lagged patent filings.