Secrecy versus patenting

Abstract

We develop an equilibrium search model of innovation with the possibility of multiple independent discovery. We distinguish innovations from ideas, and we view patents as probabilistic property rights that are constrained by the innovators' option to keep the innovation secret. We find that the patent system can simultaneously stimulate innovation, information disclosure and welfare. An optimal patent may provide more or less protection than secrecy, and in many cases, it provides less, suggesting that its main function is information spreading rather than rewarding the costs of the innovative activity.

Disclosure or secrecy? The dynamics of Open Science

“…First, building on Dasgupta and David (1994), several recent papers focus on the microeconomic conditions supporting "Open Science" as an economic institution (among others, Stern, 2004;Aghion et al, 2005;Lacetera, 2008;and Gans et al, 2008). At the same time, an emerging literature focuses on the incentives for knowledge disclosure by firms and on the interaction between trade secrecy and other mechanisms for earning returns from research investments (Horstmann et al, 1985;Arora, 1995;Anton and Yao, 2004;Lerner and Tirole, 2005;Kultti et al, 2007). This paper complements these contributions by focusing on the strategic impact of disclosure when the returns from knowledge production accrue both from citations from follow-on researchers and from traditional commercial returns.…”

A dynamic view on secrecy management

“…Companies tend to use patents in highly competitive markets with neck-a-neck competition, where firms build on other firms' innovations and products have greater substitutability (Jansen, 2011). Conversely, secrecy is desirable if competitors are unlikely to devise a similar innovation (Kultti, Takalo, & Toikka, 2007), because patent blocking then is less likely.…”

Defensive Disclosure under Antitrust Enforcement

“…A separate theoretical literature has explored the merits of trade secrecy and patenting but not defensive disclosure (e.g., Horstmann et al 1985, Anton and Yao 2004, Kultti et al 2007). In the empirical literature, Henkel and Pangrel (2008) collate wide-ranging responses of 44 patent professionals at 37 German industrial firms in an exploratory study of defensive disclosure.…”