Disclosure, Patenting, and Trade Secrecy

Arnoud Boot and Vladimir Vladimirov

No 20702, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Patent applications often reveal proprietary information to competitors, but does such disclosure harm firms or also benefit them? We develop and empirically support a theory showing that when firms patent enhancements to incumbent, non-disruptive technologies, they can cooperate more easily on these technologies, increasing their profitability. The downside of cooperating on non-disruptive technologies is that the investment in and commitment to disruptive technologies decline. To improve their commitment to disruptive technologies, some firms rely more on trade secrecy. We provide empirical support for these predictions. We document that after a patent reform that made information about patent applications widely accessible, firms cooperate more and charge higher markups. Furthermore, the nature of patented innovation has changed, with the proportion of non-disruptive patents increasing substantially. Finally, while some firms start patenting more, others patent less and rely more on trade secrecy, with the response depending on the attractiveness of firms' innovation prospects.

JEL-codes: G31 G38 L41 M40 O31 (search for similar items in EconPapers)
Date: 2025-10
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