First, firms patent to block and preempt competition by building patent fences consisting of large number of patents that protect different technical solutions to a similar functional outcome. These patents, neither used by the owner nor licensed, are an example of proprietary strategy. Second, firms patent to gain the freedom to operate, i.e. to reduce the risk of hold-up by other patent holders, and increase bargaining power in IP litigation and cross-licensing. Patent applications filed for these reasons indicate a defensive strategy.
The economic implications of strategic patenting, especially their negative impact on innovation and competition, are hotly debated among scholars and practitioners. Policy makers in particular are concerned about the large number of unused patents, a substantial share of which is probably due to strategic reasons. However, the factors driving the adoption of a specific strategy remain unexplored. Uncovering these factors can help business organizations to align patent strategy with their overall corporate strategy. A better understanding of the drivers of patent strategies is also useful for public policies aiming to foster innovation while discouraging blocking and unused patents.
This study draws on a large-scale survey of inventors listed in European patent applications and investigates how the choice of the three patent strategies above – traditional, proprietary and defensive – varies with the firm’s competitive environment, as described by technological complexity and the presence of competitors for the patent, and firms’ characteristics (e.g., the size of patent portfolio). The traditional strategy accounts for 63.3% of the sample patents, the proprietary strategy for 10.1% and the defensive strategy for 26.6% of cases.
Firms adopt a defensive strategy for patents protecting complex technologies like telecommunications and audiovisual. The effect of technological complexity increase with the firms’ capital investment. The defensive strategy is consistent with an open innovation model wherein openness is not only driven by the need to access external knowledge, but it is also spurred by the search for the freedom to operate in complex technological fields. The defensive patenting is also more likely when a firm faces competitors for the patent, but competition in the core technology of the firm makes a proprietary strategy more likely. The proprietary strategy is also more likely in discrete technologies like chemicals and pharmaceuticals. This strategy conforms to a ‘closed’ approach to innovation and IP management.
About one-third of patent applications filed for strategic reasons (proprietary and defensive strategies) are not used. Probably, these patents produce a private benefit to the owner but they probably subtract resources from inventive activities more valuable to society. Policies aiming to stimulate a more intensive exploitation of patents (e.g., Licenses of Right) should take into account the motivations for patenting and the context that generates strategic patents. Policies targeting technology diffusion probably cannot affect strategic patenting. To reduce this source of inefficient use of resources public policy should focus on the patent system – e.g., more severe examination criteria, higher renewal fees and a shorter protection period for technologies that entail shorter development and commercialization times, which implies a revision of the “one-size-fits-all” approach.
Note for editors: ‘Patent strategies: traditional, proprietary and defensive’ by Riccardo Cappelli, Marco Corsino and Salvatore Torrisi is a paper presented at the European Policy for Intellectual Property (EPIP) Conference, University of Glasgow, 2-3 September 2015. For more information visit: http://www.epip2015.org/
Riccardo Cappelli is a postdoc researcher at the Department of Management of the University of Bologna.
Marco Corsino is assistant professor of Management at the Department of Management of the University of Bologna.
Salvatore Torrisi is full professor of Strategic Management at the Department of Management of the University of Bologna.
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