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R&D Collaboration with Uncertain Intellectual Property Rights

Abstract

Patent pendencies create uncertainty in research and development (R&D) collaboration, which can result in a threat of expropriation of unprotected knowledge, reduced bargaining power and enhanced search costs. We show that—depending of the type of collaboration partner and the size of the company—uncertain intellectual property rights (IPRs) lead to reduced collaboration between firms and can, hence, hinder knowledge production. This has implications for technology policy as R&D collaborations are exempt from antitrust legislation in order to increase R&D in the economy. We argue that a functional IPR system is needed for successful utilization of this policy.

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Fig. 1

Notes

  1. It should also be noted that patent grants do not completely extinguish the risk of expropriation since protected inventions can be reengineered and invented around.

  2. This question was also part of the MIP survey in 2000 and 2004. However, we abstain from using this more recent data because the information on pending patents is added from EPO data and we want to avoid that our results are driven by reporting lags of the outcome of patent decisions: i.e., right-censoring of the patent data (see, e.g., Harhoff and Wagner 2009).

  3. Only 11.5 % of the firms in our sample of innovative firms in German manufacturing responded to the survey in both years.

  4. Note that firms can be involved in multiple types of R&D collaborations so that the fractions in Table 1 do not have to add up to the overall fraction of collaborating companies.

  5. The patent application and review procedure at the EPO involves several steps, which are briefly described in the “Appendix”.

  6. One could also argue that the patent stock variable could be a source of endogeneity in our models. We instrumented this variable with the firm’s patent stock over employment lagged by 5 years, the average patent stock over employment, and the average share of pending patents at the industry level. Rivers and Vuong (1988) tests cannot reject that the patent stock is exogenous in our regressions. Further, Staiger and Stock (1997) F-tests show that the instruments are not weak. Hence, we do not find evidence for an endogeneity problem for our patent stock variable.

  7. We conducted \(\chi ^{2}\)-tests for the null hypothesis that the effect of pending patents on collaborations with competitors is not different from their effect on vertical collaborations and on collaborations with universities. \(\chi ^{2}\)-tests reject the null hypothesis for the first case on the 10 % level. H0: competitor collaboration—university collaboration \(=\) 0; \(\chi ^{2}=3.26^*\); H0: competitor collaboration—vertical collaboration \(=\) 0; \(\chi ^{2}=2.08\).

  8. We conducted \(\chi ^{2}\)-tests for the null hypothesis that the effect of pending patents on collaborations with competitors is not different from their effect on vertical collaborations and on collaborations with universities for both subsamples. \(\chi ^{2}\)-tests reject the null hypothesis for the first hypothesis on the 10 % level for both subsamples. Small companies: H0: competitor collaboration—university collaboration \(=\) 0; \(\chi ^{2}= 0.84^*\); H0: competitor collaboration—vertical collaboration \(=\) 0; \(\chi ^{2}=2.16\). Large companies: H0: competitor collaboration—university collaboration \(=\) 0; \(\chi ^{2}=2.73^*\); H0: competitor collaboration—vertical collaboration \(=\) 0; \(\chi ^{2}=1.68\).

  9. Prior studies report more robust effects of both collaboration predictors (Cassiman and Veugelers 2002; Schmidt 2005). A potential explanation can be the difference in variables definition. Cassiman and Veugelers (2002) and Schmidt (2005) use a Likert scale variable that describes the importance of costs and risks as obstacles for innovation. We can only use a dummy variable for our sample.

  10. A more detailed description can be found, for example, in Harhoff and Wagner (2009).

  11. Note that unlike in the U.S. patent applicants at the EPO are not required to supply a list of prior art themselves.

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Acknowledgments

We are grateful to the MIP team of the ZEW Mannheim for providing the survey data and to Thorsten Doherr for his help in data processing and for providing his text field search engine. Further, we acknowledge helpful comments and discussions at the Intertic Conference on Competition Policy and Property Rights (Milan), the Pacific Rim Innovation Conference (Melbourne), and the EARIE 2010 (Istanbul).

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Correspondence to Katrin Hussinger.

Appendix: Patent Application Procedure at the EPO

Appendix: Patent Application Procedure at the EPO

A brief sketch of the steps from application to grant/refusal decision is given below:Footnote 10

  • After an application is filed, patent examiners prepare a search report that describes the state of the art that is regarded as relevant for the patentability of the invention.Footnote 11

  • 18 months after the priority date of the patent application, which is the first application date of a patent and hence the reference point for the definition of prior art, the patent application is made public along with the search report in the EPO Patent Bulletin.

  • Within 6 months after publication, applicants can request a substantial examination of the application. If an examination is not requested, the patent is deemed withdrawn.

  • If an examination is requested, a decision on the patentability of the invention is made according to the EPO patentability criteria: novelty, inventive step, and industrial applicability. The examination can end by a grant or refusal to grant.

  • The applicant can voluntarily withdraw the application at each step of the procedure.

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Czarnitzki, D., Hussinger, K. & Schneider, C. R&D Collaboration with Uncertain Intellectual Property Rights. Rev Ind Organ 46, 183–204 (2015). https://doi.org/10.1007/s11151-015-9449-0

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Keywords

  • Intellectual property
  • Patents
  • R&D collaboration
  • Uncertainty

JEL Classification

  • O31
  • O38