Patent Portfolio Race and Secrecy

Illoong Kwon ()

Discussion Papers from University at Albany, SUNY, Department of Economics

Abstract: When firms can protect their innovations by secrecy or lead-time, the additional effect of patent protection is not obvious. This paper shows that when firms compete for a single innovation, patent protection still increases R&D investment but decreases social welfare due to over-investment. However, when firms compete for multiple complementary patents (called a patent portfolio), patent protection decreases R&D investment and decreases social welfare due to under-investment. If firms cannot rely on secrecy, patent protection increases investment regardless of whether firms compete for a single patent or for a patent portfolio.

Date: 2008
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