Choosing Intellectual Protection: Imitation, Patent Strength and Licensing

David Encaoua () and Yassine Lefouili

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Abstract: Patents are probabilistic rights. We set up a multi-stage model in which choosing between patent and trade secrecy is affected by three parameters : the patent strength defined as the probability that the right is upheld by the court, the cost of imitating a patented innovation relative to the cost of imitating a secret innovation, and the innovation size defined as the magnitude of the cost reduction. The choice of the protection regime is the result of two effects: the damage effect evaluated under the unjust enrichment doctrine and the effect of market competition that occurs under the shadow of infringement. We find that large innovations are likely to be kept secret whereas small innovations are always patented. Furthermore, medium innovations are patented only when patent strength is sufficiently high. Finally, we investigate a class of patent licensing agreements used to settle patent disputes between patent holders and their competitors.

Keywords: probabilistic right; patent strength; innovation size; imitation cost; trade secrecy; droit probabiliste; force du brevet; taille de l'innovation; coût d'imitation; secret commercial (search for similar items in EconPapers)
Date: 2005
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00496942
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Citations: View citations in EconPapers (12)

Published in Annales d'Economie et de Statistique, 2005, 79/80, pp.241-271

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Related works:
Chapter: Choosing Intellectual Protection: Imitation, Patent Strength, and Licensing (2010)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2007)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2007)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2006)
Working Paper: Choosing intellectual protection: imitation, patent strength and licensing (2006)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2006)
Working Paper: Choosing intellectual protection: imitation, patent strength and licensing (2006)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2006)
Working Paper: Choosing intellectual protection: imitation, patent strength and licensing (2006)
Working Paper: Choosing Intellectual Protection: Imitation, Patent Strength and Licensing (2005)
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