Defensive Disclosure of Patentable Inventions Under Antitrust Enforcement

43 Pages Posted: 30 Sep 2012 Last revised: 29 Dec 2013

Ajay Bhaskarabhatla

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM)

Date Written: October 18, 2013

Abstract

We formulate a simple model of optimal defensive disclosure by a dominant firm facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure and that defensive disclosure served as an alternative, but less successful, mechanism to patenting at IBM in appropriating returns from R&D. We extend our analysis to two other exceptionally large firms with defensive-disclosure activity, AT&T and Xerox, and show that their patenting propensity declined under increased antitrust enforcement relative to other firms in the industry. We further extend the case study of Xerox and using a differences-in-differences approach we show that patent propensity declined and patent scope increased in patent classes affected by the 1975 consent decree. Overall, we show how these firms used defensive disclosure as a strategy to balance the benefits of patenting with the costs of uncertain antitrust enforcement.

Keywords: Defensive Disclosure, Antitrust, Innovation, IBM

JEL Classification: L40, O38, L21

Suggested Citation

Bhaskarabhatla, Ajay and Pennings, Enrico, Defensive Disclosure of Patentable Inventions Under Antitrust Enforcement (October 18, 2013). Available at SSRN: https://ssrn.com/abstract=2154558 or http://dx.doi.org/10.2139/ssrn.2154558

Ajay Bhaskarabhatla (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://people.few.eur.nl/bhaskarabhatla/

Erasmus Research Institute of Management ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1004 (Phone)

HOME PAGE: http://www.erim.eur.nl/people/ajay-bhaskarabhatla/

Enrico Pennings

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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