The Value of Giving Away Secrets

37 Pages Posted: 6 May 2003  

Oren Bar-Gill

Harvard Law School

Gideon Parchomovsky

University of Pennsylvania Law School; Bar Ilan University - Faculty of Law

Date Written: April 2003

Abstract

This Essay demonstrates the strategic advantage of narrow patents and unprotected publication of R&D output. Broad patents might stifle follow-on improvements by deterring potential cumulative innovators, who fear being held up by the initial inventor at the ex post licensing stage. By opting for a narrower patent and unprotected publication, the initial patent holder commits not to hold up follow-on inventors, thus promoting sequential innovation and generating lucrative licensing fees. Counterintuitively, in cumulative innovation settings, less protection benefits the patentee. This finding may serve as a counter-force to the much-lamented "anti-commons" problem. More generally, our theory demonstrates that the divergence between private interests and social objectives - on both the static and dynamic dimensions of intellectual property - is not as great as conventionally believed. Our theory bridges yet another gap; that between the two main theoretic strands in patent law scholarship - the property rights perspective and the information revelation perspective. It also explains the recent trend toward unprotected publication of information. Finally, we propose an important reform of the novelty requirement in patent law that would further encourage narrow patents and unprotected publication by bolstering the credibility of a patentees commitment not to patent previously published research findings.

Keywords: Patents, Intellectual Property, Cumulative Innovation, Publication, Licensing, Hold-up

JEL Classification: D23, D45, K11, L43

Suggested Citation

Bar-Gill, Oren and Parchomovsky, Gideon, The Value of Giving Away Secrets (April 2003). Harvard Law and Econ Disc Paper No. 417; Harvard Public Law Working Paper No. 64; U of Penn Law School, Public Law Working Paper No. 24; U of Penn, Inst for Law & Econ Research Paper No. 03-07. Available at SSRN: https://ssrn.com/abstract=404260 or http://dx.doi.org/10.2139/ssrn.404260

Oren Bar-Gill (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Gideon Parchomovsky

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-1603 (Phone)

Bar Ilan University - Faculty of Law ( email )

Ramat Gan 52900
Israel
972-2-5317078 (Phone)

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