Firm Reputation and Incentives to 'Milk' Pending Patents

35 Pages Posted: 21 Aug 2013

See all articles by Johannes Koenen

Johannes Koenen

ARC Econ GmbH

Martin Peitz

University of Mannheim - Department of Economics

Date Written: July 31, 2013

Abstract

In this paper we develop a theory of patenting in which a firm preserves its reputation to only apply for a patent whenever a truly patentable idea has been generated. Firms have a short-run incentive to deviate and receive additional rents from unworthy pending patents, as well as potential rents from PTO mistakes in granting patents. We provide conditions for reputation to be preserved in equilibrium and analyze which market environments are favorable for such an equilibrium to exist. In particular, we analyze the merits of different patent systems.

Keywords: pending patents, reputation, patent quality, patent office policy

JEL Classification: L150, L220, O340

Suggested Citation

Koenen, Johannes and Peitz, Martin, Firm Reputation and Incentives to 'Milk' Pending Patents (July 31, 2013). CESifo Working Paper Series No. 4355, Available at SSRN: https://ssrn.com/abstract=2313588

Johannes Koenen

ARC Econ GmbH ( email )

Berliner Platz 13
Limburgerhof, 67117
Germany

HOME PAGE: http://arc-econ.de

Martin Peitz (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

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