Changes

===Definition of patent thicketTheoretical Model===:''"And thus so have fears of “royalty stacking”, whereby the number of licenses required to bring a product or service to the marketplace stack up, one atop the other, potentially creating an insurmountable barrier to commercialization."''TBD

===Legal DiscussionMeasures of Patent Thicket===Quantitative measures of patent thicket or royalty stacking effects is:*Citation concentration of the top 4 firms in a technology area:**The measure sums citation shares of each of the top 4 firm's backward patent citations to the other firm's patents at a point in time;**As a robustness check, the authors also considered an 8 firm concentration measure and a traditional HHI measures based on sum of squared citations, and obtained qualitatively similar effects.

===Sample===The data analyzes 63 firms with at least one 3G patent over the period from 1996-2005:*Literature review The universe of 60 firms contributing patents to the 3G telecomm standard, plus 82 firms in SIC code 3663 (Radio and policy discussion of highTelevision Broadcasting and Communications Equipment) and 4812 (Radiophone and Communications) was restricted to those with at least one U.S. 3G patent.*Firm financial data (sales, assets, employees) for 1980-tech industries2005 is drawn from Compustat.*Patent data (grant dates, technology classes, citations and prior art listing) from USPTO.

*Patent protection is an important incentive for innovation.===Results===:''"The first innovators need sufficiently strong rights to create sufficient incentives to induce their pioneering workSince concentration at this level has nearly no statistically significant effect on firm market value, but enough profit potential needs to remain we conclude that four firms translate into concentration for second innovators so this industry and fragmentation is low among public cellular telecom firms, especially among vertically integrated firms. Thus, we find that they will invest if it the predicted royalty stacking problem is efficient for them to do sonot an issue in this industry."'' *In high-tech industriesR&D spillover effects are positively related to market value for upstream firms, it has been claimed that cumulative innovation but negatively related for vertically integrated and dispersed patent ownership create an environment where licenses Operator firms, although estimates are too expensive.not significant;:''"…market-driven mechanisms*Patenting propensity is negatively related to market value for upstream and vertically integrated firms, such as cross licensing, patent poolsbut positivey among Operator firms, and reputation effects, estimates are considered insufficient to completely solve royalty stacking, especially in industries such as telecommunications and computing where new technologies frequently develop under the auspices of standard setting organizationssignificant for vertically integrated firms."'' *Author finds little evidence that royalty stacking under current law The patent thicket measure, citation concentation, is not solved by cross licensingpositively related to market value for upstream and vertically integrated firms, patent poolsnegative for operators, repeat play reputation, or other mechanismsalthough estimates are not significant.**While one Insignificant results may argue that evidence reflect the low levels of royalty stacking is difficult fragmentation in this data - the concentration measure for public cellular telecom firms ranges from 53% to find because100% with an average of 83%, if a market collapses, products and services indicating that most patent citations are not produced to determine royalty rates, signs should be observed well before a market collapse occursconcentrated in the top 4 firms.

*Examples of patent holdup are rare :''"The royalty stacking theory is not robust and often involve short term players , what is most important, even in the marketsuch industries where innovation is cumulative and products integrate many components each of which may be subject to one or more patents, which calls for caution there is no real evidence that royalty stacking is a problem in broader reforms practice. In contrast to recent claims by Lemley and Shapiro (2006), we find no evidence of a significant royalty stacking problem in the patent system3G telecoms industry...:''"Solid The empirical and theoretical results of this Essay seriously question the underpinnings of recent proposals advocating various changes in antitrust enforcement and patent reforms law, which are probably among the best ways meant to alleviate address the risk purported tragedy of royalty stacking the anti-commons and other licensing issues, as stemming the misfortunes caused by ever growing patent flood and eliminating weak patents would reduce overall patent counts and limit those remaining to valuable contributions. As with all reforms, patent reform should be done with care to avoid unintended consequencesthickets."''

===Policy Advocated in PaperDependent Variable and Model===The dependent variable is Tobin's Q (ratio of firm's market value to tangible assets).*It The model specification is widely recognized that IPR reform is neededOLS with robust standard errors.*Patenting control variables include:**Citation Concentration, meant to capture patent thickets or royalty stacking effects (see above for definition);**While anecdotal evidence shows that problems exists in Patenting propensity, as measured by the firm's patent systemstock and R&D stock in a given year;**Spillover, as measured by the sum of R&D spending of close competitors weighted by the issues are not regular enough to justify any currently proposed policy change as citation concentation, which is the costs will outweigh uncentered correlation between the benefitstwo firms patent citations (excluding self-citations) across technology classes.**Any reforms should complement existing voluntary market mechanismsEach of these patenting variables is interacted with indicators of whether the firm has an Operator or an upstream/vertically integrated structure.*Firm and industry controls are:**Shadow cost of physical capital, measured by ratio off R&D spending to tangible assets (net stock of property, plant and equipment), and higher order terms;**Shadow cost of intellectual capital, measured by ratio of the number of a firm''"In the ends patents to tangible assets (net stock of property, plant and equipment), considering both the scant evidence that royalty stacking and other complements issues higher order terms;**Indicators of whether firms are widespread and recurring problemsOperators, Upstream (design firms such as Qualcomm) or Vertically Integrated firms (>10% of revenue from manufacturing), along with vertically integrated firms as the availability of several countervailing market responsesomitted group;**log Net sales and its lag;**Technological opportunity in a technology area, we find that were society to implement several as measured by the logarithm of these policy recommendations it would risk setting a course for Scylla in the absence weighted sum of any evidence the patent stock of danger from Charybdisa company's technologically close competitors for each patent technology class, and a lag;**Year and industry indicators."''