Bessen (2003) - Patent Thickets Strategic Patenting Of Complex Technologies

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  • Bessen, James (2003), "Patent thickets: Strategic patenting of complex technologies", Available at SSRN 327760
@article{bessen2003patent,
   title={Patent thickets: Strategic patenting of complex technologies},
   author={Bessen, James},
   journal={Available at SSRN 327760},
   year={2003},
   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.},
   discipline={Econ},
   research_type={Theory},
   industry={All},
   thicket_stance={Pro},
   thicket_stance_extract={This paper argues that patent thickets can reduce R&D incentives even when there are no transaction costs, holdup or vertical monopoly problems... Much of the literature discussing patent thickets has focused on potential problems of transaction costs, holdup and vertical monopoly. This paper demonstrates that patent thicket strategies can discourage innovation even without these problems. This means that although cross-licensing and patent pools may resolve some problems of transaction cost and vertical monopoly, these institutions do not correct all problems associated with patent thickets.},
   thicket_def={#A-T, #B, #C1, References Shapiro, References Heller/Eisenberg, Complementary Inputs, Diversely-Held, Transaction Costs, Overlapping Patents},
   thicket_def_extract={The problem Baker describes is often called a “patent thicket.” These occur when each product may involve many patents, in contrast with the one-to-one correspondence between products and patents that is assumed in the patent race literature. Recent commentators suggest that lower patenting standards encourage patent thickets, creating difficulties for innovators (see Gallini, 2002, for a review). When innovators must negotiate with large numbers of patentholders, they may face excessive transaction costs (Heller and Eisenberg, 1998), “holdup,” and problems of vertical monopoly (Shapiro, 2001). In contrast, my model concerns horizontal technological competition and bilateral negotiation between two firms with uncertain conflicting patents. I identify a problem that occurs even without transaction costs, with as few as two firms and without holdup.3},  
   tags={Patent Race, Cross-licensing, Sequential Innovation, Lead-time Advantage, Mexican Standoff}, 
   filename={Bessen (2003) - Patent Thickets Strategic Patenting Of Complex Technologies.pdf}
}

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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.

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