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*This page is referenced in the [[Patent Thicket Literature Review]]

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This paper investigates the effects of patent thicket, exploiting a unique measure of the patent thicket from an inventor survey and on data on the use of patents by around 1,200 Japanese firms. First, we develop an index of patent thicket in each industry, mainly using the size of complementary patents necessary for commercializing an invention, which is from the RIETI inventor survey. Secondly, we will assess empirically how “patent thickets” affect the patenting propensity and the use of the patents as well as whether it negatively affects the appropriability of the R&D. In such assessment, we focus on the interaction effects between the level of patent thickets and firm size, based on a theoretical view which patent thickets affect a large firm more, since the latter has a large stake for the prevention of a hold-up and has a larger demand for the combining patents. Focusing on the firm-industry interaction effects allow us to control for industry fixed effects. Major findings are as follows. Firstly, we have found that patent thickets are high in information and communication electronics equipment sector, information and communication sector and motor vehicles sectors while they are low in printing and food products industries. These results based on the average number of patents joint used for commercializing an invention are largely consistent with existing empirical studies on patent thickets. Secondly, we have found that patenting propensity increases more with firm size in the industry where patent thicket is high, controlling for industry fixed effects. Such effects do not exist among small firms. On the other hand, our findings suggest that a number of invention disclosures to the IPR department or that for applying a patent by a firm do not increase significantly more with firm size in the industry where patent thicket is high. Thirdly, we have found that while the proportion of used patents declines with firm † We would like to thank for valuable comments by the members of the research project at the Institute of Intellectual Property. We would like to thank for the Japan Patent Office for enabling us to use the firm level data of the Survey of Intellectual Property-Related Activities. 2 size, such effect is no stronger in the industry where patent thicket is high. One explanation for this is that cross-licensing is often a response for patent thicket problem. Cross licensing facilitates access to complementary technologies of other firms, which makes commercialization of own technology easier. We also find that while blocking increases with firm size, such effect is no stronger in the industry where patent thicket is high. We do not observe significantly larger negative effects of patent thickets on the patent use by every size of firms. Lastly, we have found that exclusively used patents make the largest contributions to a firms’ profit, in particular, more than cross licensed patents.