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Media type:
E-Book;
Report
Title:
Patents, freedom to operate, and follow-on innovation: Evidence from post-grant opposition
Contributor:
Gäßler, Fabian
[Author];
Harhoff, Dietmar
[Author];
Sorg, Stefan
[Author];
von Graevenitz, Georg
[Author]
imprint:
München und Berlin: Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, 2024
Footnote:
Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen.
Description:
We study the blocking effect of patents on follow-on innovation by others. We posit that follow-on innovation requires freedom to operate (FTO), which firms typically obtain through a license from the patentee holding the original innovation. Where licensing fails, follow-on innovation is blocked unless firms gain FTO through patent invalidation. Using large-scale data from post-grant oppositions at the European Patent Office, we find that patent invalidation increases follow-on innovation, measured in citations, by 16% on average. This effect exhibits a U-shape in the value of the original innovation. For patents on low-value original innovations, invalidation predominantly increases low-value followon innovation outside the patentee's product market. Here, transaction costs likely exceed the joint surplus of licensing, causing licensing failure. In contrast, for patents on high-value original innovations, invalidation mainly increases high-value follow-on innovation in the patentee's product market. We attribute this latter result to rent dissipation, which renders patentees unwilling to license out valuable technologies to (potential) competitors.