Strategic determinants of decisions not to settle patent litigation

Settlement outcomes in patent litigation are modeled as resulting from strategies pursued by firms with their patented technologies. Hypotheses are derived for two types of influences: the use of patents as isolating mechanisms to protect valuable strategic stakes, and their ‘defensive’ role in obtaining access to external technologies through mutual hold‐up. Parameter estimates from a sample selection probit model provide support for the strategic stakes hypotheses, while the evidence for mutual hold‐up is inconclusive. Interindustry comparisons show that nonsettlement of patent suits in both research medicines and computers is increased by strategic stakes and, in addition, mutual hold‐up appears to play an important role in computer patent suits. Copyright © 2003 John Wiley & Sons, Ltd.     

Text matching to measure patent similarity

Research Summary : We propose using text matching to measure the technological similarity between patents. Technology experts from different fields validate the new similarity measure and its improvement on measures based on the United States Patent Classification System, and identify its limitations. As an application, we replicate prior findings on the localization of knowledge spillovers by constructing a case–control group of text‐matched patents. We also provide open access to the code and data to calculate the similarity between any two utility patents granted by the United States Patent and Trademark Office between 1976 and 2013, or between any two patent portfolios. Managerial Summary : We propose using text matching to measure the technological similarity between patents. The method can be used by various practitioners such as inventors, attorneys, patent examiners, and managers to search for closely related prior art, to assess the novelty of a patent, to identify R&D opportunities in less crowded areas, to detect in‐ or out‐licensing opportunities, to map companies in technology space, and to find acquisition targets. We use an expert panel to validate the improvement of the new similarity measure on measures based on the United States Patent Classification System, and provide open access to the code and data to calculate the similarity between any two utility patents granted by the USPTO between 1976 and 2013, or between any two patent portfolios.     

Technology convergence capability and firm innovation in the manufacturing sector: an approach based on patent network analysis

As a consequence of the convergence between manufacturing technology and the foundation technologies of Industry 4.0, it is becoming more important for firms to formulate an innovation strategy for their technological capabilities. In this context, the present study measures firm‐level technology convergence (TC) capability using patent network analysis. A firm’s TC capabilities are measured using three centrality indices pertaining to a patent network, which is constructed based on the relationship between patents and their international patent classification. For the empirical analysis, panel regression is conducted to observe the effect of TC capabilities on innovation for the top 30 firms in four manufacturing industries. We find that the TC degree positively influences the firms’ overall innovation, namely their total number of patents, and negatively influences their convergent innovation, calculated as the ratio between the number of TC patents and the total number of patents, while the effect of TC betweenness is the opposite. These findings imply that while concentrating on similar technologies may promote quick technology application, it could hamper the enhancement of a TC’s potential. To promote TC, a firm should thus develop technologies more likely to be involved in TC.     

PATENT DAMAGES AND SPATIAL COMPETITION*

We analyze price competition between a spatially differentiated product patentee and an imitator anticipating probabilistic future patent damages. We compare the performance of three damage regimes. The ‘reasonable royalty’ regime, which yields symmetric equilibrium pricing, maximizes static welfare and yields the highest innovation incentives when patent enforcement is nearly certain. The ‘lost profits’ regime, which may deter infringement, yields the highest innovation incentives when patent enforcement is less‐than‐certain and products are sufficiently valuable. The ‘unjust enrichment’ regime yields low static efficiency and low innovation incentives. We offer new insights into the ‘hypothetical negotiation’ that courts use to construct reasonable royalties.     

On the development and application of a self–organizing feature map–based patent map

Recently, the range of R&D management has expanded to include management of technological assets such as technology information, product/process data, and patents. Among others, patent map (PM) has been paid increasing attention by both practitioners and researchers alike in R&D management. However, the limitation of conventional PM has been recognized, as the size of patent database becomes voluminous and the relationship among attributes becomes complex. Thus, more sophisticated data–mining tools are required to make full use of potential information from patent databases. In this paper, we propose an exploratory process of developing a self–organizing feature map (SOFM)–based PM that visualizes the complex relationship among patents and the dynamic pattern of technological advancement. The utility of SOFM, vis–à–vis other tools, is highlighted as the size and complexity of the database increase since it can reduce the amount of data by clustering and visualize the reduced data onto a lower–dimensional display simultaneously. Specifically, three types of PM, technology vacuum map, claim point map, technology portfolio map, are suggested. The proposed maps may be used in monitoring technological change, developing new products, and managing intellectual property.     

Innovation in the Shadow of Patent Litigation

We analyze non-cooperative R&D investment by two firms that already hold patents that they can assert against each other with probabilistic success. The market structure results from stochastic innovation and patent litigation. Depending on the level of infringement fees, we highlight positive and negative effects of litigation threats on innovation. We define an appropriate regulatory structure of infringement fees that will implement socially efficient R&D investments in the case of symmetric and asymmetric patent portfolios.     

Patent-based inventor profiles as a basis for human resource decisions in research and development

Profiles of inventors' technological competence are a valuable source of information for decision-making in research and development (R&D) management, e.g. concerning inventor assessment, human resource development and R&D team-building. In the following exposition, a new method of inventor profiling will be put forward, which is based in particular on semantic patent analysis and multidimensional scaling. First, in the course of semantic patent analysis, specialized software, equipped with a natural language processor, reads the patent text transferring the contents into a subject–action–object–format (SAO). The extracted SAO structures are then used to create similarity matrices for patents or patent sets, respectively, according to a specific similarity value. Subsequently, an inventor competence map can be produced by means of multidimensional scaling.
The benefits of this method for R&D-related issues in human resource management will be illustrated by the example of a German mechanical engineering company. Two distinct types of profiles were generated and tested: (i) the profile of a single key inventor and (ii) a profile of key inventor sets. The single key inventor profile gives information on the range of competence, i.e. the homogeneity or heterogeneity of a certain inventor's competences, providing far more detailed insights than resorting to bibliographic data like international patent classification (IPC) classes or citations, whereas the latter kind of profile establishes the position of a certain key inventor in relation to others, helping to highlight specific groups of inventors and their domains. These results are clearly apt to support human resource management.     

How to analyze technology lifecycle from the perspective of patent characteristics? the cases of DVDs and hard drives

This study aims to analyze the technology lifecycle from the perspective of the dynamics of patent characteristics; the dynamics of patent characteristics are proposed as an approach for characterizing technology lifecycle in this study. DVD and hard drive technologies, which have already experienced their complete technology lifecycles, were selected for analyzing their patent characteristics as a function of the different stages of their technology lifecycles to thus obtain the objective of this research. The results obtained in this study provide a channel to assess the nature of firms’ innovation strategies along technology lifecycles. It can be observed that (1) patents attempt to cite more prior patent or non-patent references at the latter stages to find more technological or scientific sources that can contribute to technological innovation, (2) most litigated patents are granted in the Growth stage, so it is expected that patents in the Growth stage should be more important and, thus, more relevant to dominant design than the patents granted in other stages.     

The drivers of patent transactions: corporate views on the market for patents

In recent years, the proactive management of patents and their exploitation through licensing out and sales transactions have been enhanced by the development of intermediaries and trading platforms. This paper first investigates the main drivers of companies' decisions to engage in patent licensing and sales; then, it examines how improvements in the marketplace for patents and more intense involvement of patent brokers might impact the factors hindering the development of patent transactions. The study's findings are supported by the results found in the scientific literature and by evidence from a survey conducted on a sample of companies involved in patent transactions.     

A dynamic stochastic analysis of international patent application and renewal processes

This paper formulates a dynamic stochastic model to examine the joint patent application and renewal behaviors under an international patent-protection regime. The framework makes it possible to utilize both the cross-sectional (multi-country application) and the time-series (patent renewal) dimensions of available international patenting data to estimate the private value of patent protection, and allows us to distinguish more aspects of patent returns. The evolution dynamics of the value of European patents in pharmaceutical and electronics industries are examined. Estimation results indicate that pharmaceutical patents are endowed with higher initial returns, thus their owners tend to seek patent protection in more countries than electronics patent holders. However, pharmaceutical patents become obsolete at a much faster pace than electronics patents, and consequently they have lower renewal rates and shorter lives.     

Patent Quality and a Two‐Tiered Patent System

In this paper, we study the determinants of patent quality and volume of patent applications when inventors care about perceived patent quality. We analyze the effects of various policy reforms, specifically, a proposal to establish a two‐tiered patent system. In the two‐tiered system, applicants can choose between a regular patent and a more costly, possibly more thoroughly examined, ‘gold‐plate’ patent. Introducing a second patent‐tier can reduce patent applications, reduce the incidence of bad patents, and sometimes increase social welfare. The gold‐plate tier attracts inventors with high ex‐ante probability of validity, but not necessarily applicants with innovations of high economic value.     

‘Essential’ Patents,FRAND Royalties and Technological Standards

Standard Setting Organizations have developed FRAND agreements in order to prevent firms from holding up other participants once a standard is created. We analyze here the consequences of such agreements—in particular the requirements of fairness and non-discrimination—for the creation of technological standards that require the participation of existing patent holders. We abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one's patent portfolio, as is implicitly the case in FRAND agreements, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to ‘pad’ by contributing patents that are ‘inessential’ for the given standard, a phenomenon that seems to be widespread. Several results emerge from the analysis: (i) the number of inessential patents co-varies positively with the number of essential patents; (ii) there is over-investment relative to the second-best, that is when padding cannot be avoided and (iii) the threat of disputes reduces incentives to pad but at the cost of lower production of strong patents; (iv) mitigating this undesirable side-effect calls for a simultaneous increase in the cost of padding, through a better filtering of patent applications.     

One year ahead! Investigating the time lag between patent publication and market launch: insights from a longitudinal study in the automotive industry

Technology‐oriented companies find themselves confronted with the challenge of having to react quickly to technology‐based innovations by competitors. Especially the market launches of innovative products have the ability to change the competitive environment dramatically. This calls for the ability to discern product technologies in due time. Even though several methods of technology monitoring are based on patent information, the important time lag between patent disclosure and market launch is still unclear and volatile for reasons unknown. Therefore, we have analyzed this time lag of a respective product by way of a longitudinal case study in the field of automotive engineering. The results show that in our case, patents form a valuable information source in short‐term product technology monitoring. Hence, analyzing patents in the context of product technologies and reacting to emerging products is a race against time.     

资本市场压力与企业策略性专利行为:卖空机制的视角

创新是一种不确定性高且周期长的投资活动,需要风险偏好更大、对失败容忍更高的市场环境,而资本市场具有筛选和发现创新型企业、有效分散创新风险的功能,因而对创新活动起着关键作用。然而,中国资本市场短期投资者比例高,融券交易成本高且交易不活跃,加上专利评价体系对不同质量的专利区分度较低,导致资本市场压力对创新活动没有发挥出信息机制和治理机制两种效应。相反,资本市场压力带来的负面信息表达渠道和管理层短期业绩压力,造成了中国专利申请中存在“重数量、轻质量”“重申请、轻维护”的企业策略性专利行为所衍生的“专利泡沫”问题。本文采用中国融资融券制度作为准自然实验,考察卖空机制对企业创新的影响效应和作用机理。研究发现,企业面临卖空压力时会更加积极地申请专利,但专利的申请质量有所下降,表现为专利授权率降低;专利结构有所恶化,最终授权数增加的主要是容易研发、授权快的实用新型专利和外观设计专利;专利得到授权后,企业放弃缴纳维持费用以终止专利权。这些策略性专利行为在短期内可以减少企业的卖空交易量,推高企业市值,但长期看对企业的业绩没有积极影响,是一种“创新假象”。卖空机制主要通过施压机制来影响企业创新,管理层业绩压力、外部监督压力、股价信息传递压力越大的企业,在面临卖空威慑时更有动力进行策略性专利行为。为促进企业创新向高质量发展,需要进一步完善融资融券制度和专利评价体系。     

Estimating the patent premium: Evidence from the Australian Inventor Survey

In this paper we use novel survey data on 1,790 Australian inventions to estimate the average patent premium, which provides an important benchmark for technology managers and IP professionals. Our data are drawn from the Australian Inventor Survey, which was sent to all Australian applicants who submitted a patent application to the Australian Patent Office from 1986 to 2005. Since some patent applications were unsuccessful, we have information about the private value of both patented and unpatented inventions. Our results suggest that the presence of a patent increases the returns to an invention by around 40 to 50 percent regardless of how we define ‘value.’ Copyright © 2011 John Wiley & Sons, Ltd.     

Typology of the patent troll business

Patent trolls have many faces, since the media uses this expression in various ways. The patent troll phenomenon thus seems to be an ambiguous term that is discussed in several directions. This paper reveals that a patent troll as such has no distinct shape or appearance. Our analysis redeems a troll classification solely from firms’ market position, such as being nonpracticing, and shows that a patent troll business can only be defined by the respective practice to enforce intellectual property rights (IPR). Using 10 case studies, of which five are treated in detail, the analysis reveals a distinct typology of IPR enforcement mechanisms and suggests a framework to assess the troll business and its effects. This paper furthermore identifies the nature of troll behavior to be: (a) a practice to enforce IP rights enabling repayments for earlier innovation investments and (b) a strategy that may create costs to affected industries. The differentiated troll analysis reveals negative but also positive effects of the troll business on incentives to innovate.     

The propensity to patent

This paper analyzes the relationship between 1974 R&D expenditures and invention patenting by 4,274 narrowly-defined lines of business in 443 U.S. industrial corporations. The probability of non-zero patenting rose systematically with company-financed R&D outlays, as did the number of patents received. Within industries, patents tended most frequently to rise in proportion to R&D; among the exceptions, the tendency was toward diminishing returns. Variables measuring overseas sales, federal R&D support, diversification, scope of invention use, and invention type had only modest explanatory power. There was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries.     

Reputations for toughness in patent enforcement: implications for knowledge spillovers via inventor mobility

‘Job hopping’ by engineers and scientists is widely heralded as an important channel for knowledge spillovers within industries. Far less is known, however, about the actions firms take to reduce the outward flow of knowledge through markets for skilled labor. This study investigates the efficacy of a lever that has received little research attention: corporate reputations for toughness in patent enforcement. Drawing on unique data on enforcement activity, intra‐industry inventor mobility, and patent citations in the U.S. semiconductor industry, we find that a firm's litigiousness significantly reduces spillovers otherwise anticipated from departures of employee inventors, particularly when the hiring organizations are entrepreneurial ventures. Surprisingly, the deterrent effects of patent enforcement are similar in magnitude for firms located in California, a state characterized by open norms for knowledge trading, and firms headquartered in other U.S. states. The study sheds new light on the strategic actions firms use to prevent rivals from capturing value from their investments in human capital and research and development. Copyright © 2009 John Wiley & Sons, Ltd.     

Selling ideas: the determinants of patent value in an auction environment

Although previous empirical studies have found relationships between patent characteristics and value, none have determined how specific attributes relate to auction value or even the probability of a successful auction sale. Using a Heckman two-step model, we regress 13 independent variables against unique patent auction data, finding that publicly owned and frequently referenced patents are more valuable, and that other things being equal, there is an optimal time to offer a patent up for auction.     

Patent management in entrepreneurial SMEs: a literature review and an empirical study of innovation appropriation,patent propensity,and motives

Managers make a number of strategic choices when trying to capture returns from innovation investments, including what appropriation strategy to use and whether or not to patent, strategic choices that depend among other things on firm size. Previous literature, being reviewed in this paper, shows that the patent propensity is lower in small and medium‐sized enterprises (SMEs) than in large firms and that patenting as means for appropriation is of less importance among SMEs. Chief executive officers (CEOs) and/or research and development (R&D) managers of 26 entrepreneurial SMEs have been interviewed to explain these differences and to provide insight on how patenting is used in SMEs. The patent competence was low among the studied SMEs, and internal patent resources were found to be important for effective and efficient use of the patent system, for application as well as monitoring and enforcement. While of limited perceived importance for protecting inventions in entrepreneurial SMEs, patents were used to attract customers and venture capital, which is of utmost importance for the survival and growth of these firms. Thus, patenting has an important role to play even in firms where the protective function of patents is secondary.