Intellectual Property Disclosure as 'Threat'

29 Pages Posted: 8 Sep 2007

See all articles by Scott Baker

Scott Baker

Washington University in St. Louis - School of Law

Pak Yee Lee

University of Leicester - Department of Economics

Claudio Mezzetti

University of Leicester - Department of Economics

Date Written: September 4, 2007

Abstract

This paper models the disclosure of knowledge as a threat, useful in ensuring firms keep their commitments. We show that firms holding knowledge are better able to enforce agreements than firms that don't. In markets requiring innovation to make a product, disclosure is a more powerful threat than entry by the punishing firm alone. Occasionally, the punishing firm won't be able to innovate, making it impossible for it to enter the cheating firm's market and punish. The punishing firm, however, can through disclosure credibly ensure that one, if not many, firms enter the cheating firm's market. In the model, firms contract explicitly to exchange knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We find conditions under which firms can self-enforce both agreements. The enforcement conditions are weaker when (1) firms possess knowledge and (2) knowledge is easily transferable to other firms. The disclosure threat has implications for antitrust law generally, which are considered.

Keywords: intellectual property, disclosure, repeated games, self-enforcement

Suggested Citation

Baker, Scott A. and Lee, Pak Yee and Mezzetti, Claudio, Intellectual Property Disclosure as 'Threat' (September 4, 2007). UNC Legal Studies Research Paper No. 1012152, Available at SSRN: https://ssrn.com/abstract=1012152 or http://dx.doi.org/10.2139/ssrn.1012152

Scott A. Baker

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

Pak Yee Lee

University of Leicester - Department of Economics ( email )

Department of Economics
University Road
Leicester, Leicestershire LE1 7RH
United Kingdom

Claudio Mezzetti (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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