Abstract
On the basis of the economic theory of network effects, this article provides a novel explanation of the so-called patent paradox, i.e. the question why the propensity to patent is so strong when the expected average value of most patents is low. It demonstrates that the patent system of a country resembles a telephone network or a social media platform. Patents are perceived as nodes in a virtual network that, as a whole, exhibits network effects. It is explained why patents are not independent of other patents but that they complement each other in several ways both within and beyond markets and fields of technology, and that patents thus create synchronization value over and above individual interests of patent holders in exclusivity. As a consequence, the more patents there are, the more valuable it is to also seek patents, and vice versa. Since patents thus display increasing returns to adoption, the willingness to pay for the next patent slopes upwards. This explains why, after a phase of early instability and a certain tip** point, many countries’ patent systems expanded quickly and eventually became a rigid standard (“lock-in”). The concluding section raises the question what regulatory measures are suitable to effectively address the ensuing anticommons effects.
Prof. Dr. Alexander Peukert is Professor of Civil and Commercial Law, Faculty of Law, Goethe University Frankfurt am Main.
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Notes
- 1.
Hanns Ullrich, ‘The Political Foundations of TRIPS Revisited’ in Hanns Ullrich and others (eds), TRIPS plus 20. From Trade Rules to Market Principles (Springer 2016) 112.
- 2.
Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff, ‘Incidence and Growth of Patent Thickets: The Impact of Technological Opportunities and Complexity’ (2013) 61(3) JIndEcon 521, 521-2 with further references; Stefano Comino, Fabio M Manenti and Nikolaus Thumm, ‘The Role of Patents in Information and Communication Technologies: A Survey of the Literature’ (2019) 33(2) Journal of Economic Surveys 404, 406-7.
- 3.
See Carl Shapiro, ‘Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting’ in Adam B Jaffe, Josh Lerner and Scott Stern (eds), Innovation Policy and the Economy Vol 1 (Univ of Chicago Press 2001) 119; Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2013, supra n 2) at 559; Bronwyn H Hall and others, ‘A Study of Patent Thickets’ (2013) Intellectual Property Office Research Paper No 2, 3; CJEU, 16.07.2015, Case C-170/13 Huawei Technologies [2015] ECLI:EU:C:2015:477, para 47 (the telecommunications standard at stake is composed of more than 4.700 standard essential patents); Jonathan M Barnett, ‘From Patent Thickets to Patent Networks: The Legal Infrastructure of the Digital Economy’ (2014) 55 Jurimetrics J 1, 1-53.
- 4.
Jérôme Danguy, Gaétan de Rassenfosse and Bruno van Pottelsberghe de la Potterie, ‘On the Origins of the Worldwide Surge in Patenting: An Industry Perspective on the R&D-Patent Relationship’ (2014) 23(2) Industrial and Corporate Change 535, 560 (“R&D explains only a small share of the variance in patent filings”); Florian Jell, Joachim Henkel and Martin Wallin, ‘Offensive Patent Portfolio Races’ (2017) 50 Long Range Planning 531, 544 (“We could clearly show that the observed increases in patenting were not mainly driven by heightened inventive activity and that patenting rates are, within boundaries, somewhat arbitrary.”); Mahdiyeh Entezarkheir, ‘Patent Thickets, Defensive Patenting, and Induced R&D: An Empirical Analysis of the Costs and Potential Benefits of Fragmentation in Patent Ownership’ (2017) 52 EmpirEcon 599, 603; Mark A Lemley, ‘The Surprising Resilience of the Patent System’ (2016) 95 TexLRev 1, 36 (“The growth rate of R&D was highest in the late 1970s and early 1980s, when patents were weak and the number of patents was not growing dramatically, and in the late 1990s, when patents were strong and the number of patents was growing dramatically. R&D expenditure leveled off in the early 1990s, when patents were getting stronger and the number of patents was growing, and again in the early 2000s, when patents were strong and the number of patents was growing.”). But see Cassandra Mehlig Sweet and Dalibor Sacha Eterovic Maggio, ‘Do Stronger Intellectual Property Rights Increase Innovation?’ (2015) 66 World Development 665, 667 (cautioning that statistics on R&D are weak predictors of real innovative advances).
- 5.
Bronwyn H Hall and Rosemarie Ham Ziedonis, ‘The Patent Paradox Revisited: An Empirical Study of Patenting in the US Semiconductor Industry, 1979-1995’ (2001) 32 RJE 101, 102.
- 6.
Mark A Lemley (2016, supra n 4) at 33–34 (“The increase in patenting doesn't seem to have any effect on economic growth. Nor does economic growth seem to explain the increase in patenting.”).
- 7.
Zvi Griliches, ‘Patent Statistics as Economic Indicators: A Survey’ (1990) 28 JEconLit 1661, 1669; Bronwyn H Hall and Dietmar Harhoff, ‘Recent Research on the Economics of Patents’ (2012) NBER Working Paper 17773, at 35 <http://www.nber.org/papers/w17773> accessed 1 March 2022.
- 8.
Edwin Mansfield, ‘Patents and Innovation: An Empirical Study’ (1986) 32(2) Management Science 173, 173–81; Wesley M Cohen, Richard R Nelson and John P Walsh, ‘Protecting their Intellectual Assets: Appropriability Conditions and Why US Manufacturing Firms Patent (or Not)’ (2000) NBER Working Paper 7552 <https://www.nber.org/papers/w7552> accessed 1 March 2022; Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) 102 with further references; Roberto Fontana and others, ‘Reassessing Patent Propensity: Evidence from a Dataset of R&D Awards, 1977-2004’ (2013) 42 Research Policy 1780-92 with further references.
- 9.
Salvatore Torrisia and others, ‘Used, Blocking and Slee** Patents: Empirical Evidence from a Large-Scale Inventor Survey’ (2016) 45 Research Policy 1374, 1384.
- 10.
Harald Degner and Jochen Streb, ‘Foreign Patenting in Germany, 1877-1932’ in Pierre-Yves Donzé and Shigehiro Nishimura (eds), Organizing Global Technology Flows: Institutions, Actors, and Processes (Routledge 2018) 17-38, 20-1 with further references.
- 11.
Bronwyn H Hall and Dietmar Harhoff (2012, supra n 7) at 28.
- 12.
Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 102; Gideon Parchomovsky and R Polk Wagner, ‘Patent Portfolios’ (2015) 154 UPaLRev 1, 5, 17 (summarizing the patent paradox); Sabrina Safrin, ‘Chain Reaction: How Property Begets Property’ (2007) 82 NotreDameLRev 1917, 1941–42; Mark Lemley (2016, supra n 4) at 42.
- 13.
Nancy Gallini, ‘Do Patents Work? Thickets, Trolls and Antibiotic Resistance’ (2017) 50(4) CJE 893, 898.
- 14.
Bronwyn H Hall and others (2013, supra n 3) at 3.
- 15.
Clarisa Long, ‘Patent Signals’ (2002) 69 UChiLRev 625; Christine Godt, Eigentum an Information (Mohr Siebeck 2007) 262; Clark D Asay, ‘The Informational Value of Patents’ (2016) 31 BerkeleyTechLJ 259; Jason Rantanen and Sarah E Jack, ‘Patents As Credentials’ (2019) 76 Wash&LeeLRev 311 (“purposes beyond the strictly exclusionary”). See also Mark Lemley (2016, supra n 4) at 40–42 with further references.
- 16.
Jeremy W Bock, ‘Patent Quantity’ (2016) 38 UHawLRev 287, 310.
- 17.
John H Barton, ‘Reforming the Patent System’ (2000) 287 Science 1933; Dan L Burk, ‘On the Sociology of Patenting’ (2016) 101 MinnLRev 421, 442 (“holding patents demonstrates its adoption of the proper role in the proper social script”).
- 18.
Mark Lemley (2016, supra n 4).
- 19.
Ibid, at 51.
- 20.
Patents filed or granted for a certain national or regional patent jurisdiction are independent of patents obtained for the same invention in other countries (cf Art 4bis(1) Paris Convention). The numerous formally independent patent laws share, however, the basic legal features responsible for the network effect discussed in this article. For reasons of simplicity, I therefore refer to “the” patent system/network in the singular. The interrelatedness of national/regional patent systems and the ensuing structure of indeed “the” global patent system are beyond the scope of this article.
- 21.
Clayton P Gillette, ‘Lock-in Effects in Law and Norms’ (1998) 78 BULRev 813, 817; Michael Klausner, ‘Corporations, Corporate Law, and Networks of Contracts’ (1995) 81 VaLRev 757, 761-2; critical Larry E Ribstein and Bruce H Kobayashi, ‘Choice of Form and Network Externalities’ (2001) 43 Wm&MaryLRev 79, 108 ff. See further C Y Cyrus Chu, ‘Precedent Externality, Network Effect, and the Possible Inefficiency of the Evolution of Laws’ (2003) 16 EurJLEcon 187 (concerning the efficiency of tort rules); Dan L Burk, ‘Law as Network Standard’ (2005-2006) YaleJL&Tech 63 (harmonization of Internet-related laws); Bryan Druzin, ‘Buying Commercial Law: Choice of Law, Choice of Forum, and Network Externalities’ (2009) 18 TulJInt'l&CompL 131, 134-5; Bryan Druzin, ‘Using Network Effects to Strengthen International Institutions in a Time of Global Instability’ (2018) European Society of International Law Conferences Paper No 3; Andrea K Bjorklund and Bryan H Druzin, ‘Institutional Lock-in Within the Field of Investment Arbitration’ (2018) 39 UPaJInt’lL 707.
- 22.
Economics: Carl Shapiro (2001, supra n 3) at 121 (companies are “increasingly inclined to seek patents, causing an increase in the propensity to patent, as well as an increase in the practice of defensive patenting”); Bronwyn H Hall and others (2013, supra n 3) at 3 (on strategic patenting with feedback mechanisms); Mahdiyeh Entezarkheir (2017, supra n 4) at 603 (“Thus, patent thickets have triggered patenting on marginal innovations to enlarge patent portfolios for bargaining power in patent disputes.”); Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff, ‘How To Measure Patent Thickets - A Novel Approach’ (2011) 111 Economic Letters 6, 7 (“Patent data may be thought of as network data, although it is not often analysed this way by economists.”).
Legal Scholarship: Paul A David, ‘Intellectual Property Institutions and the Panda's Thumb: Patents, Copyrights, and Trade Secrets in Economic Theory and History’ in Mitchel B Wallerstein, Mary E Mogee and Robin A Schoen (eds), Global Dimensions of Intellectual Property Protection in Science and Technology (National Academy Press 1993) 19, at 43–4 (brief reference to network theory); R Polk Wagner, ‘Understanding Patent-Quality Mechanisms’ (2009) 157 UPaLRev 2135, 2155 (observing that “even if most firms would be better off with high-quality patents (and fewer of them), adopting such a strategy in the face of others' more numerous (and lower quality) patents is disadvantageous”); Jonathan M Barnett (2014, supra n 3) at 20 ff; Jeremy W Bock (2016, supra n 16) at 313 (“the decision to engage in high-volume patenting is likely a self-reinforcing practice”). See also European Patent Office, Scenarios for the Future - Annual Report (2007) <https://www.epo.org/about-us/annual-reports-statistics/annual-report/2007.html> accessed 1 March 2022, 10 (“patent engine”).
- 23.
This is a different research question than studying the significance of IPRs in network markets. See, in this regard, eg Mark A Lemley and David McGowan, ‘Legal Implications of Network Economic Effects’ (1998) 86 CalifLRev 479, 523-41; Peter S Menell, ‘Economic Analysis of Network Effects and Intellectual Property’ in Ben Depoorter and Peter S Menell (eds), Research Handbook on the Economics of Intellectual Property Law Vol I Theory (Edward Elgar Publishing 2019) 157.
- 24.
Alfonso Gambardella, Dietmar Harhoff and Bart Verspagen, ‘The Economic Value of Patent Portfolios’ (2017) 26 JEconManageStrat 735, 751.
- 25.
Sabrina Safrin (2007, supra n 12) at 184.
- 26.
Harvey Leibenstein, ‘Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand’ (1950) 64 QJE 183, 184.
- 27.
Jeffrey Rohlfs, ‘A Theory of Interdependent Demand for a Communications Service’ (1974) 5 The Bell Journal of Economics and Management Science 16; Michael L Katz and Carl Shapiro, ‘Network Externalities, Competition, and Compatibility’ (1985) 75 AER 424; Oz Shy, ‘A Short Survey of Network Economics’ (2011) 38 RevIndOrg 119.
- 28.
Peter S Menell (2019, supra n 23) at 158, 221; Carl Shapiro and Hal R Varian, Information Rules: A Strategic Guide to the Network Economy (HBSP 1999).
- 29.
Nicholas Economides, ‘Competition Policy in Network Industries: An Introduction’ in Dennis W Jansen (ed), The New Economy and Beyond. Past, Present and Future (Edward Elgar Publishing 2006) 96, 98; Nicholas Economides, ‘The Economics of Networks’ (1996) 14 IJIO 673, 680. See further Stan J Liebowitz and Stephen E Margolis, ‘Network Externality: An Uncommon Tragedy’ (1994) 8 JEP 133, 135 (the net value of an action (consuming a good, subscribing to telephone service) is affected by the number of agents taking equivalent actions); Stan J Liebowitz and Stephen E Margolis, 'Network Externalities (Effects)', Palgrave Dictionary of Economics (Palgrave Macmillan 1998) (a change in the benefit, or surplus, that an agent derives from a good when the number of other agents consuming the same kind of good changes); Jeffrey Church, Neil Gandal and David Krause, ‘Indirect Network Effects and Adoption Externalities’ (2008) 7(3) RNE 337, 337 (“network effect exists if consumption benefits depend positively on the total number of consumers who purchase compatible products”).
- 30.
Peter S Menell (2019, supra n 23) at 163-4.
- 31.
Michael L Katz and Carl Shapiro, ‘Technology Adoption in the Presence of Network Externalities’ (1986) 94 JPE 822, 822-3 (VHS vs beta); W Brian Arthur, ‘Competing Technologies, Increasing Returns, and Lock-In by Historical Events’ (1989) 99 The Economic Journal 116.
- 32.
Paul Pierson, ‘Increasing Returns, Path Dependence, and the Study of Politics’ (2000) 94 APSR 251, 252.
- 33.
Nicholas Economides (1996, supra n 29) at 674; Nicholas Economides (2006, supra n 29) at 98.
- 34.
Nicholas Economides (1996, supra n 29) at 679.
- 35.
Mark A Lemley and David McGowan (1998, supra n 23) at 483 fn 8; Jeffrey Church, Neil Gandal and David Krause (2008, supra n 29) at 340 (“Consumer demand is for a group of complementary products that, when combined or consumed together, provide value.“).
- 36.
Ohio et al v American Express Co et al 585 US (2018) (Breyer dissenting).
- 37.
Stan J Liebowitz and Stephen E Margolis (1998, supra n 29); Michael L Katz and Carl Shapiro (1985, supra n 27); Nicholas Economides (2006, supra n 29) at 96, 100; Paul Klemperer 'Network Goods (Theory)' The New Palgrave Dictionary of Economics (living edition, Palgrave Macmillan 2020); Mark A Lemley and David McGowan (1998, supra n 23) at 488-9.
- 38.
Mark A Lemley and David McGowan (1998, supra n 23) at 488, 591; Ohio et al v American Express Co et al 585 US (2018) (comparing network effects between merchant-Visa and Visa-Credit-card-holder vs reader-newspaper and newspaper-advertiser).
- 39.
Peter S Menell (2019, supra n 23) at 161.
- 40.
Michael L Katz and Carl Shapiro (1985, supra n 27); Michael L Katz and Carl Shapiro, ‘Systems Competition and Network Effects’ (1994) 8 JEP 93, 97-100; Nicholas Economides (2006, supra n 29) at 100; Stan J Liebowitz and Stephen E Margolis (1994, supra n 29) at 133, 136; Mark A Lemley and David McGowan (1998, supra n 23) at 491-4; Peter S Menell (2019, supra n 23) at 161.
- 41.
Paul Pierson (2000, supra n 32) at 251, 254 (increased use of a technology encourages investments in the linked infrastructure, which in turn attracts still more users to the technology).
- 42.
Michael L Katz and Carl Shapiro (1986, supra n 31); Nicholas Economides (2006, supra n 29) at 108 (competition for, not in the market); Paul Klemperer (2020, supra n 37); See also James Mahoney, ‘Path Dependence in Historical Sociology’ (2000) 29 Theory and Society 507, 513 (critical juncture); Paul Pierson (2000, supra n 32) at 263.
- 43.
Nicholas Economides (2006, supra n 29) at 104; Peter S Menell (2019, supra n 23) at 161.
- 44.
Nicholas Economides (2006, supra n 29) at 100-1.
- 45.
Stan J Liebowitz and Stephen E Margolis (1994, supra n 29) at 143; Mark A Lemley and David McGowan (1998, supra n 23) at 484 (pointing out the differences between natural monopolies as supply-side effects and network effects as a demand-side phenomenon).
- 46.
Michael L Katz and Carl Shapiro (1994, supra n 40) at 111 (strong winners and strong losers); Nicholas Economides (2006, supra n 29) at 104.
- 47.
See Douglas C North, Institutions, Institutional Change and Economic Performance (CUP 1990) 95 (defining path dependencies as institutional patterns or event chains that have deterministic properties); Paul A David, ‘Why are Institutions the ‘Carriers of History’?: Path Dependence and the Evolution of Conventions, Organizations and Institutions’ (1994) 5(2) SCED 205, 208; Clayton P Gillette (1998, supra n 21) at 817 (“The problem of path dependence and lock-in arises when a technological standard that has obtained a foothold, based on fortuity or favorable conditions that no longer apply, possesses certain characteristics that inhibit displacement by demonstrably superior technologies”); James Mahoney (2000, supra n 42) at 507; Paul Pierson (2000, supra n 32) at 251.
- 48.
Cf Neil Gandal 'Network Goods (Empirical Studies)' The New Palgrave Dictionary of Economics (living edn Palgrave Macmillan 2020) with further references (can one supplier ask a premium for substitutable, more or less identical products?).
- 49.
See, on the one hand, Joseph Farrell and Garth Saloner, ‘Standardization, Compatibility, and Innovation’ (1985) 16(1) RJE 70, 81 (there can be inefficient inertia, or inefficient innovation, and these problems cannot be entirely resolved by communication among firms); Peter S Menell (2019, supra n 23) at 161 (“Take, for example, a social network like Facebook. A new entrant to this market, say Google+, might offer enhanced functionality. But if most of my social network is already on Facebook and I cannot easily bridge the two networks, then I am far less likely to switch”). Contra Stan J Liebowitz and Stephen E Margolis ‘The Fable of the Keys’ (1990) 33 The Journal of Law & Economics 1, 4 (“Observable instances in which a dramatically inferior standard prevails are likely to be short-lived, imposed by authority, or fictional.”); Michael L Katz and Carl Shapiro (1985, supra n 27) at 93, 108 (“there is no general theoretical result implying excess inertia in market equilibria”).
- 50.
Tim Weitzel, Oliver Wendt and Falk V Westarp, ‘Reconsidering Network Effect Theory’ (2000) 91 ECIS <http://aisel.aisnet.org/ecis2000/91> accessed 1 March 2022; Nicholas Economides (2006, supra n 29) at 96, 106-7 (large network effects pose an interesting dilemma for antitrust authorities).
- 51.
This accusation has been directed at the use of NE theory to explain the proliferation of certain standard contract forms and corporations. Cf Michael Klausner (1995, supra n 21) at 774 (“Unlike a telephone network, where units are physically connected, a contractual network (like a PC network) is linked together by commonly used complementary products.”); Bryan Druzin (2009, supra n 21) at 159-60 (“…commercial law is more analogous to a telephone than a Ferrari.”). Critical Paul Pierson (2000, supra n 32) at 252; see also Mark A Lemley and David McGowan (1998, supra n 23) at 483 (“Significant confusion remains as to what constitutes a ‘network effect,‘ and how such effects should be used in the law.”) at 570-6 (critically examining Klausner’s assumption about network effects in contract and corporation law practice); Larry E Ribstein and Bruce H Kobayashi (2001, supra n 21) at 109-16.
- 52.
Preamble, Art 27(1) TRIPS.
- 53.
Christoph Menke, Kritik der Rechte (Suhrkamp 2015).
- 54.
Stan J Liebowitz and Stephen E Margolis (1998, supra n 29) (“autarky value […] is the value generated by the product even if there are no other users”).
- 55.
See also Larry E Ribstein and Bruce H Kobayashi (2001, supra n 21) at 108 ff (providing evidence that the inherent characteristics of two business forms, rather than network externalities, drive the choice of the forms).
- 56.
Bronwyn H Hall and Dietmar Harhoff (2012, supra n 7) at 35; Alfonso Gambardella, Dietmar Harhoff and Bart Verspagen (2017, supra n 24) at 751 (“wide portfolios also arise for more genuine reasons associated with the opportunity to increase the economic value of inventions”).
- 57.
See Stephen Pericles Ladas, Patents, Trademarks, and Related Rights: National and International Protection Vol 1 (HUP 1975) 61-7; Peter Kurz, Weltgeschichte des Erfindungsschutzes (Carl Heymanns Verlag 2000) 361-8.
- 58.
Bronwyn H Hall and Dietmar Harhoff (2012, supra n 7) at 14, 24 (given software patentability, ICT firms engaged in patent portfolio races needed to add software patents to their portfolio); Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 101–28; Ian M Cockburn and Megan MacGarvie, ‘Patents, Thickets, and the Financing of Early-Stage Firms: Evidence from the Software Industry’ (2007) NBER Working Paper 13644, at 2 <http://www.nber.org/papers/w13644> accessed 1 March 2022; Florian Jell, Joachim Henkel and Martin Wallin (2017, supra n 4) at 533-4.
- 59.
Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 107.
- 60.
Nancy Gallini (2017, supra n 13) at 908.
- 61.
Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 116; Jonathan M Barnett (2014, supra n 3) at 34-5 (distinguishing between upstream licensors with strong R&D and patents such as Qualcomm and downstream manufacturers and other intermediate users with lower R&D intensity). But see Bronwyn H Hall, ‘Is There a Role for Patents in the Financing of New Innovative Firms?’ (2019) 28 Industrial and Corporate Change 675, at 6 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3177027> accessed 1 March 2022 (with the exception of two studies of Israeli firms, no study showed more than half the firms having at least one patent application during the period of study).
- 62.
On the differences between patent and patent portfolio/arms races see Florian Jell, Joachim Henkel and Martin Wallin (2017, supra n 4) at 531 n 1.
- 63.
Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 109 (“’demonstration effect’ of Polaroid’s successful patent infringement suit against Kodak”). See also Bronwyn H Hall and others (2013, supra n 3) at 22-4 with further references; Florian Jell, Joachim Henkel and Martin Wallin (2017, supra n 4) at 531-549.
- 64.
Sabrina Safrin (2007, supra n 12) at 1943–44.
- 65.
Markus Reitzig, ‘The Private Values of 'Thickets' and 'Fences': Towards an Updated Picture of the Use of Patents Across Industries’ (2004) 13 Economics of Innovation and New Technology 457, 457-76. On additional network effects of patents in complex technologies see infra 3.2.2.
- 66.
Cf Bryan Druzin (2009, supra n 21) at 136 (the “basic nature of trade” triggers network effects).
- 67.
Florian Jell, Joachim Henkel and Martin Wallin (2017, supra n 4) at 542 (initiators of offensive patent races).
- 68.
Salvatore Torrisia and others (2016, supra n 9) at 1380 (large firms exhibit a larger share of strategic non-use (30%) and slee** patents (14%, patent applications filed for reasons different from commercial use and blocking other parties) than small and medium-sized enterprises).
- 69.
Gregory R Day and W Michael Schuster, ‘Patent Inequality’ (2019) 71 AlaLRev 115, 150 (“dominant firms seem to be using large portfolios to insulate their market power from some of the most innovative firms“).
- 70.
Dietmar Harhoff, Georg v Graevenitz and Stefan Wagner, ‘Conflict Resolution, Public Goods, and Patent Thickets’ (2016) 62(3) Management Science 704, 715.
- 71.
A famous but rare example is the “Statement Concerning CERN W3 Software Release Into Public Domain” of 30 April 1993 <https://cds.cern.ch/record/1164399?ln=de#> accessed 1 March 2022.
- 72.
Bronwyn H Hall and Dietmar Harhoff (2012, supra n 7) at 35.
- 73.
Dietmar Harhoff, Georg v Graevenitz and Stefan Wagner (2016, supra n 70) at 719. The significance of strategic patententing is noted both by critical observers of the patent system [see Peter Drahos and John Braithwaite, Information Feudalism. Who Owns the Knowledge Economy (Earthscan 2002) 46] and pro-patent lobbying organisations [see 4ip <https://www.4ipcouncil.com/4-SMEs/4-reasons-patent> accessed 1 March 2022 (market access, negotiating, funding and strategic value as the four “key benefits to patenting”)].
- 74.
Cf Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 107; Carl Shapiro (2001, supra n 3) at 129-30 (cross licenses the norm in markets for microprocessors); Peter Drahos and John Braithwaite (2002, supra n 73) at 45; Sabrina Safrin (2007, supra n 12) at 1944-45; Ralph Siebert and Georg v Graevenitz, ‘Jostling for Advantage or Not: Choosing between Patent Portfolio Races and Ex Ante Licensing’ (2010) 73 Journal of Economic Behavior & Organization 73, 226, with further references; Mahdiyeh Entezarkheir (2017, supra n 4) at 603.
- 75.
European Patent Office (2007, supra n 22) at 37.
- 76.
Salvatore Torrisia and others (2016, supra n 9) at 1382 (documenting a positive association between defensive or offensive blocking motives and intensity of competition); Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2013, supra n 2) at 559 (finding that the patent explosion coincides with the decrease in technological opportunities after 1994).
- 77.
Nancy Gallini (2017, supra n 13) at 911 (“trolls contribute to the thicket’s density in forcing targeted firms to accumulate more patents in defense”); Bronwyn H Hall (2019, supra n 61) at 12; Stefano Comino, Fabio M Manenti and Nikolaus Thumm (2019, supra n 2) at 415-7.
- 78.
Carl Shapiro (2001, supra n 3) at 122-4.
- 79.
Ibid at 134.
- 80.
Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2011, supra n 22) at 6-9; Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2013, supra n 2) at 525 (optics as complex technology); Bronwyn H Hall and others (2013, supra n 3) at 20-1 (reviewing evidence that technology is getting more complex and interwoven); Jonathan M Barnett (2014, supra n 3) at 15 (documenting patent pools in ICT markets); Olga Gurgula, ‘Strategic Accumulation of Patents in the Pharmaceutical Industry and Patent Thickets in Complex Technologies - Two Different Concepts Sharing Similar Features’ (2017) 48(4) IIC 2017, 385, 388 (complex industries such as semiconductors, biotechnology, computer software, the Internet and nanotechnology).
- 81.
Olga Gurgula (2017, supra n 80) at 388; Stefano Comino, Fabio M Manenti and Nikolaus Thumm (2019, supra n 2) at 421.
- 82.
Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2013, supra n 2) at 525.
- 83.
Jonathan M Barnett (2014, supra n 3) at 6.
- 84.
Olga Gurgula (2017, supra n 80) at 388 (defining discrete technologies).
- 85.
Ibid at 392-396, 399-400.
- 86.
Cf Carl Shapiro (2001, supra n 3) at 123 (referring to the classic complements problem).
- 87.
Supra note 29.
- 88.
Cf Dietmar Harhoff, Georg v Graevenitz and Stefan Wagner (2016, supra n 70) at 719.
- 89.
Cf Jonathan M Barnett (2014, supra n 3) at 6.
- 90.
Georg v Graevenitz, Stefan Wagner and Dietmar Harhoff (2012, supra n 7) at 22 (“some firms still amass patents in order to signal quality in later stage financing or for cross licensing purposes.“); Dan L Burk (2016, supra n 17) (“venture capitalists look for patents as a marker of innovation because patents are what innovative firms are supposed to have”); Jason Rantanen and Sarah E Jack (2019, supra n 15) (“purposes beyond the strictly exclusionary”).
- 91.
Sibylle Lehmann-Hasemeyer and Jochen Streb, ‘The Berlin Stock Exchange in Imperial Germany: A Market for New Technology?’ (2016) 106(11) AER 3558, 3569.
- 92.
Ibid at 3560-1 (“Whereas only 25 percent of the firms with only one patent made this information public, three-quarters of the firms which patented more than ten innovations mentioned their patents at the time of their IPO“).
- 93.
Ian M Cockburn and Megan MacGarvie (2007, supra n 58) at 1422. See also Carolin Haeussler, Dietmar Harhoff and Elisabeth Mueller, ‘How Patenting Informs VC Investors – The Case of Biotechnology’ (2014) 43 Research Policy 1286, 1293; Bronwyn H Hall (2019, supra n 61) at 5-8. But see Daniel Hoenig and Joachim Henkel, ‘Quality Signals? The Role of Patents, Alliances, and Team Experience in Venture Capital Financing’ (2015) 44 Research Policy 1049, 1058 (venture capitalists value patents highly, but not as signals of the venture’s technology quality).
- 94.
Sibylle Lehmann-Hasemeyer and Jochen Streb (2016, supra n 91) at 3567.
- 95.
Bronwyn H Hall and Rosemarie Ham Ziedonis (2001, supra n 5) at 115, 118.
- 96.
Europe: Lisa Evers, Helen Miller and Christoph Spengel, ‘Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations’ (2015) 22 IntTaxPublicFin 502 <https://doi.org/10.1007/s10797-014-9328-x> accessed 1 March 2022; Harald J Amberger and Benjamin Osswald, ‘Patent Concentration, Asymmetric Information, and Tax-Motivated Income Shifting’ (2020) WU International Taxation Research Paper Series No 2020-05, 1 <https://ssrn.com/abstract=3600839> <https://doi.org/10.2139/ssrn.3600839> accessed 1 March 2022 (Apple is said to have achieved estimated tax savings of $14 billion through IP shifting to Ireland). US: Michael J Graetz and Rachael Doud, ‘Technological Innovation, International Competition, and the Challenges of International Income Taxation’ (2013) 113 ColumLRev 347, 394; Andrew Blair-Stanek, ‘Intellectual Property Law Solutions to Tax Avoidance’ (2015) 62 UCLALRev 2, 5 (“IP-shifting strategies cost the Treasury as much as $90 billion per year, a staggering one-third of the total U.S. income taxes paid by all corporations”).
- 97.
Harald J Amberger and Benjamin Osswald (2020, supra n 96) (“patent concentration shapes an MNC’s incentives to shift income via patents”).
- 98.
Ugo Pagano, ‘The Crisis of Intellectual Monopoly Capitalism’ (2014) 38 CJE 1409, 1423.
- 99.
Dan L Burk (2016, supra n 17).
- 100.
Harald J Amberger and Benjamin Osswald (2020, supra n 96) at 1; European Patent Office (2007, supra n 22) at 37 (“business now sees patent rights as a financial asset”).
- 101.
On network effects of financial markets see generally Nicholas Economides (1996, supra n 29) at 679-80.
- 102.
Stan J Liebowitz and Stephen E Margolis (1994, supra n 29) at 136.
- 103.
Ibid.
- 104.
Supra note 20.
- 105.
Jeremy W Bock (2016, supra n 16) (“quantity, unlike quality, may actually be a solvable problem because it is easier to measure--and what can be measured can be managed”).
- 106.
Bronwyn H Hall and others (2013, supra n 3) at 26-8.
- 107.
Peter Drahos and John Braithwaite (2002, supra n 73) at 204; generally Douglas C North (1990, supra n 47) at 73.
- 108.
Carolyn Deere Birkbeck, The World Intellectual Property Organization (WIPO). A Reference Guide (Edgar Elgar 2016) 184 (WIPO’s users, member states accounting for the greatest proportion of these users and many of WIPO’s staff think that “fee-paying users of WIPO’s services should be viewed as the organisation’s key clients”). Similarly German Patent and Trade Mark Office, Press Release of 28 February 2020, <https://www.dpma.de/english/services/public_relations/press_releases/20200228.html> accessed 1 March 2022; EUIPO, <https://euipo.europa.eu/ohimportal/en/the-office> accessed 1 March 2022 (“our core business has been the registration of EU trade marks and registered Community designs”); EPO, <https://www.epo.org/about-us/annual-reports-statistics/annual-report/2019/executive-summary.html> accessed 1 March 2022 (“Forging closer ties with users and adopting a more consultative approach in 2019 helped us to target our improvement efforts towards meeting their needs.”)
- 109.
Art 178(1) Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union Trade Mark (Text with EEA relevance) OJ of 16.06.2017, L 154, at 1; Art 57(4) Patent Cooperation Treaty (PCT); Art 23(4)(b) Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (1999); Art 12(4)(b) Madrid Agreement Concerning the International Registration of Marks (as amended on 28 September, 1979).
- 110.
Ingrid Schneider, Das Europäische Patentsystem (Campus Verlag 2010) 188-218.
- 111.
Cf European Patent Office (2007, supra n 22) at 2, 30-46 (“market rules” scenario).
- 112.
Supra n 1.
- 113.
Contra Sabrina Safrin (2007, supra n 12) (“No cost-benefit calculation takes place.”); Dan L Burk (2016, supra n 17) (“there is no reason to believe that the observed behavior of corporations, universities, or other organizations in procuring, holding, or enforcing patents will be either coherent or rational”).
- 114.
Cf Douglas C North (1990, supra n 47) at 95; Paul A David (1994, supra n 47) at 208; Paul Pierson (2000, supra n 32) at 254.
- 115.
Cf Paul Klemperer (2020, supra n 37) with further references.
- 116.
Compare Fritz Machlup, An Economic Review of the Patent System (US Government Printing Office No 15, 1958) 79-80 (no economist could possibly state with certainty that the patent system as a whole confers a net benefit or a net loss upon society) with Mark Lemley (2016, supra n 4) at 52–54 (“if the market values patents for patents’ sake, … we ought to be hesitant to disrupt that value by eliminating the patent system”).
- 117.
See, eg, Michael A Heller, The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives (Basic Books 2008) 31; Ugo Pagano (2014, supra n 98); Bronwyn H Hall and others (2013, supra n 3) at 60 (“the operation of the patent system could use some improvement”).
- 118.
Douglas C North (1990, supra n 47) at 137-8.
- 119.
Douglas C North (1990, supra n 47) at 99.
- 120.
Ted Sichelman, ‘Commercializing Patents’ (2010) 62 StanLRev 341.
- 121.
Geertrui van Overwalle, ‘Inventing Inclusive Patents: From Old to New Open Innovation’ in Peter Drahos, Gustavo Ghidini and Hanns Ullrich (eds), Kritika Vol 1 (Edward Elgar 2015) 206.
- 122.
Abraham Bell and Gideon Parchomovsky, ‘Reinventing Copyright and Patent’ (2014) 113 MichLRev 231.
- 123.
Cf European Patent Office (2007, supra n 22) 44-5 (outlining such a scenario for 2025).
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Peukert, A. (2023). Virtual Patent Networks and Their Network Effects. In: Godt, C., Lam**, M. (eds) A Critical Mind. MPI Studies on Intellectual Property and Competition Law, vol 30. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-65974-8_13
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