Patents vs trade secrets: knowledge licensing and spillover

Sudipto Bhattacharya and Sergei Guriev

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We develop a model of two-stage cumulative research and development (R&D), in which one Research Unit (RU) with an innovative idea bargains to license her nonverifiable interim knowledge exclusively to one of two competing Development Units (DUs) via one of two alternative modes: an Open sale after patenting this knowledge, or a Closed sale in which precluding further disclosure to a competing DU requires the RU to hold a stake in the licensed DU’s post-invention revenues. Both modes lead to partial leakage of RU’s knowledge from its description, to the licensed DU alone in a closed sale, and to both DUs in an open sale. We find that higher levels of interim knowledge are more likely to be licensed via closed sales. If the extent of leakage is lower, more RUs choose open sales, generating a non-monotonic relationship between the strength of Intellectual Property Rights (IPR) and aggregate R&D expenditures and the overall likelihood of development by either DU.

Keywords: JEL classification codes : D23; O32; O34 (search for similar items in EconPapers)
JEL-codes: D23 O32 O34 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2005
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http://eprints.lse.ac.uk/444/ Open access version. (application/pdf)

Related works:
Journal Article: Patents vs. Trade Secrets: Knowledge Licensing and Spillover (2006)
Working Paper: Patents vs Trade Secrets: Knowledge Licensing and Spillover (2006)
Working Paper: Patents vs Trade Secrets: Knowledge Licensing and Spillover (2006)
Working Paper: Patents VS Trade Secrets: Knowledge Licensing and Spillover (2006)
Working Paper: Patents VS Trade Secrets: Knowledge Licensing and Spillover (2006)
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