Patents as negotiating assets: Patenting versus secrecy for startups

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  • This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as doi: 10.1111/ecoj.12540

Abstract

We analyse a sequential innovation model and show that relatively narrow patent rights can facilitate a market in which startups’ patents are traded as negotiating assets. In this market, the trade of patents, on top of monopoly profits, conveys an extra surplus from the patents’ capacity to affect future tech-transfer negotiations. This surplus, which stems from a patent's potential ability to exclude infringers and the corresponding enforcement spillovers that patents confer, may incentivise innovations that would not have been possible under trade secrecy, improving social welfare.

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