Pre-emptive patents - Enseignement supérieur et Recherche

Pre-emptive patents:
what they are and what they do
Dominique Guellec1, Catalina Martinez2, Pluvia Zuniga3
1,3 Directorate for Science, Technology and Industry, OECD
2 Institute of Public Goods and Policies, IPP-CSIC
EAS Internal Seminar
1
Introduction
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Rise of patenting worldwide
Concern about quality of patents
Perception of increasing strategic use of patenting (anecdotal
evidence, surveys):
◦ Bloking others to patent : pre-emption
◦ Defense itself and secure freedom to operate
How important is the blocking phenomenon aiming
at pre-empting others to patent?
Can we characterise pre-emptive patents with the
aid of patent data?
2
Survey Evidence – Strategic Patenting –
Cohen et al (2000) “The Carnegie Mellon Survey” for US
Reasons (nonexclusive) (% of companies declaring)
Products
Processes
– Prevent copying
96
78
– Patent blocking
82
64
– Prevent suits (defensive)
59
47
– Use in negotiations
48
37
– Enhance reputation
48
34
– Licensing revenue
28
23
– Measure performance
6
5
Carnegie Mellon definition: “blocking patents’” are meant to prevent
other firms’ attempts to patent a related invention
3
What are blocking patents?
‰
‰
Block or “kill” other patent applications
Entry barriers into markets and technologies : pre-emption
¾ if granted, market power to holder
- Useful to attack others and gain licensing profits; to
exchange technology; as protection from being accused of
“infringing” others
¾ If not granted (withdrawn or refused), free patent market place
- Useful to deter entry into markets: create uncertainty; ensure
freedom to operate
- Withdrawals can be seen as very defensive strategies : one
entry barriers generated through prior art others can have
their patents refused
4
Two main orientations of blocking patenting
Offensive blocking: conceived to threaten, attack, and weaken
others
• Surrounding high value patents with a “picket screen” of minor
patents (covering incremental innovations on its periphery)
• Restraining freedom to operate of competitors by filing
patents at the margin of their areas of activity to improve
bargaining positions in cross-licensing
• To achieve opportunistically licensing or advantageous
settlement conditions in case of litigation (e.g. patent trolls,
ingenious drafting of patent claims)
‰
Defensive blocking: to ensure freedom to operate
• “building fences” to counter-suit in case of attacks
• To keep others off the market (with no intention of commercialisation)
• To prevent attacks by designing overlapping inventions across several
patents (e.g. patent thickets)
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‰
‰
Offensive patenting:
x Patent sharks (“throlls”) companies or individuals (Henkel and
Reitzig, 2007): Forgent Networks Inc (JPEG image compression
standard); by early 2005 received more than US$ 100 million in
licensing fees from 35 companies, and is suing 44 companies
x NTP suing RIM (blackberry) threatening to shut down RIM's
operations in the U.S. and issued a settlement for US$ 612.5 million
in March 2006
Defensive/offensive patenting:
x semiconductors since the 1990s (Hall and Ziedonis, 2001);
software industries, e.g. IBM ; Oracle, etc.
Mutually blocking (overlapping rights):
x Plant biotech patents (Marco and Reusser, 2007)
x Comestics, i.e. L’oreal and Henkel KGaA
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When entry into an industry can only take place through the invention
and patenting of a substitute for a monopolist´s product, they show
that it is rational for the incumbent, under certain conditions, to preempt entry of potential competitors by patenting the substitute himself
and letting the patent sleep
◦ the pre-emption threat needs to be credible (R&D commitment)
◦ Patenting a substitute technology would always be valuable to the
incumbent because it enables to preserve monopoly profits, which
typically exceed the duopoly profits with entry.
◦ The more drastic the underlying innovation on which the R&D
competition is based, the lower the incentives for and the profits with
pre-emptive patenting Îpre-emptive patenting associated more to
incremental innovation
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Ceccagnoli (2008) : pre-emption tends to improve remarkably
the appropriability of returns to R&D (especially for incumbents
with strong market power and facing high threats of entry),
thereby increasing the value from their intangible assets
7
Can we identify blocking
behaviour based on patent data?
• Prior art is used in most patent laws to asses novelty and inventive step
(non-obviousness, US) : patent and non patent literature public at the date
of the filing
Citation categories (EPO and PCT search reports)
Category
X
Meaning
Particularly relevant documents when taken alone (a claimed invention cannot be
considered novel or cannot be considered to involve an inventive step)
Y
Particularly relevant documents if combined with one or more other documents of the same
category such a combination being obvious to a person skilled in the art
A
E
Documents defining the general state of the art (but not belonging to X or Y)
Potentially conflicting documents – any patent document bearing a filing or priority date
earlier than the filing date of the application searched but published later than that date,
and the content of which would constitute prior art
X, Y and E are critical documents for validating patentability
A documents define the general state of the art
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How does blocking work?
Model: Multinomial logit on the fate of the citing patent
application (1: grant, 2: withdrawal, 3: refusal), related to:
ƒ Conflicting backward citations (X, Y, E)
ƒ State of the art backward citations (A)
ƒ Forward citation profile of patents compromising patentability
(“pure X”, “X and A”)
ƒ procedural status of the cited patent (granted, withdrawn,
refused, pending)
Data: PATSTAT April 2007: 396 707 EP [atent applications and
their corresponding EP cited patents (either directly or through
an equivalent)
• They correspond to all EPO patent applications granted, refused or
withdrawn with priority years 1990-2000 citing other EPO applications,
directly or indirectly, under X, Y, E or A citation categories
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Expectations
Are citations compromising patentability of other inventions
blocking the patenting of other inventions because :
¾ they represent a relevant contribution to the art and thus
“naturally” block further filings,? Îcitation category A
¾ Or, because they were “strategically” designed to limit patentability
in a specific field (entry deterrence)? Înever cited as category A
(dubious quality; rather incremental inventions)
¾Further, are un-granted patent applications (cf withdrawn or
pending, refused) equally effective in enacting barriers to entry into
technology?
Patent data can help us answer these questions.
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Blind, Cremers and Mueller (2007)
Traditional protection motive is related to more forward
citations than the blocking or exchange motives. Within
blocking, offensive blocking is related to a significantly lower
number of citations than defensive blocking
Grimpe and Hussinger (2007)
Deal value of acquisition target firm in M&A increases with
the “blocking potential” of its patent portfolio, measured in
terms of number of X and Y forward citations
All
EP filings
Filings
859706
EP filings
citing
Pure X
97467
EP filings
citing
X and A
328178
EP filings
citing
Pure A
170622
Grants
475016
45985
189596
106241
Withdrawals
254792
33784
93258
45672
Refusals
24030
2595
9512
5030
Grants over filings
59%
47%
58%
62%
Withdrawals over filings
30%
35%
28%
27%
Refusals over filings
3%
3%
3%
3%
Technology field
Electronics-electricity
Instruments
Chemicals-materials
Pharma-biotech
Industrial processes
Mechanics-transport
Consumers-construction
Total
Non
cited
Cited as
pure X
Cited as
pure X
withdrawn
Cited as
pure X
granted
Cited as
X and A
Cited as
pure A
All
filings
65%
62%
63%
66%
65%
66%
70%
11%
12%
14%
17%
10%
10%
9%
3%
3%
4%
6%
3%
2%
3%
5%
7%
8%
7%
7%
7%
5%
10%
12%
11%
9%
9%
9%
7%
13%
13%
12%
7%
14%
14%
13%
100%
100%
100%
100%
100%
100%
100%
65%
557 889
12%
104 716
3%
27 260
7%
56 705
10%
86 423
13%
113 660
100%
859 706
The MNL model
Citation category
X (“X”)
Y (“X”)
E (“X”)
A (“A”)
“X” from “pure X”
“X” from “X and A”
“A” from “X and A”
“A” from “pure A”
“X” from “pure X” granted
“X” from “pure X” withdrawn
“X” from “pure X” refused
“X” from “pure X” pending
“X” from “X and A” granted
“X” from “X and A” withdrawn
“X” from “X and A” refused
“X” from “X and A” pending
“A” from “X and A” granted
Applicant countries
Priority years
Technology classes
Observations
Wald Chi2
Log pseudolikelihood
Refusal
0.035
0.003
-0.25
-0.11
Cited profile
Cited status
Withdrawa Refusal Withdrawal Refusal Withdrawal
6.45
l
4.01
8.04
-3.77
0.09
8.03
-0.02
3.95
-0.13
-3.47
-0.01
-1.56
0.07
4.14
-0.12
12.90
1.55
8.05
-0.07
8.59
-0.13
1.23
YES
YES
YES
YES
YES
YES
396 707
22 411.85
-283 868.42
YES
YES
YES
YES
YES
YES
396 707
22 628.82
-283 738.13
0.18
8.64
0.87
6.38
-0.08
4.80
-0.24
-5.13
YES
YES
YES
YES
YES
YES
396 707
24 623.35
-282 568.69
14
Self citations
Priority lag
Refusal Withdrawal Refusal Withdrawal
0.109
7.80
“X” from “pure X” no self
-0.005
8.89
“X” from “pure X” self
-0.025
4.38
“X” from “X and A” no self
“X” from “X and A” self
0.003
1.79
“A” from “X and A” no self
-0.099
-2.89
“A” from “X and A” self
-0.280
-5.82
“A” from “pure A” no self
-0.012
-1.15
“A” from “pure A”
-0.006
-3.27
“X”
X” self
lag <=2
years
0.11
9.42
2 years
0.07
7.58
“X” from “pure
“X andX”A”lag
lag> <=
2
years
-0.003
3.87
“X”
from “X and A” lag > 2
years
-0.01
3.79
“A”
from “X and A” lag <= 2
years
-0.21
-2.35
“A”
from “X and A” lag > 2
years
-0.12
-3.75
“A” from “pure A” <= 2 years
0.18
-1.18
“A” from “pure A” > 2 years
-0.04
-1.69
Applicant countries
YES
YES
YES
YES
Priority years
YES
YES
YES
YES
Technology classes
YES
YES
YES
YES
Observations
396 707
396 707
Wald Chi2
22 854.90
22 668.00
Log pseudolikelihood
-283 607.75
-283 716.52
Cited
withdrawals
being more
powerful
when close
invention date
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Main findings
‰ Pure X have a stronger blocking impact than other cited patent
applications
‰ Pure X withdrawn have the strongest blocking power among
cited patent applications
‰ Further, withdrawn patent applications, of any kind, have the
strongest blocking power within their groups
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Scope and cost
Claims (ln)
IPC classes (ln)
inventors (ln)
Backward patent citations (ln)
Science linkage
Applicant country
United States
Japan
Germany
France
United Kingdom
Australia
Switzerland
China
Korea
Other EU15 countries
All other countries
Technology class
Electronics
Instruments
Chemicals-materials
Pharmaceuticals-biotech
Industrial processes
Machines, mechanics, transport
purex v. all
purex v. cited
1
2
pure x withdrawn v.
pure x granted
3
0.6**
0.4**
0.1
0.5**
0.2
-0.2
-1.3**
-0.6**
0.2
3.8**
-0.3
0.4
-1.6**
2.4**
10.0**
0.3
0.5
-1.0**
-1.3**
-0.4
-0.7
-1.4**
0.8
-0.4
-1.3**
-0.9**
1.5
5.1**
0.9
-0.4
2.7*
5.4**
-0.3
10.3
4.3*
0.7
2.6*
12.3**
-4.8*
-1.2
-4.4
7.8**
11.6**
3.4
1.9
0.5
3.3
6.7*
-0.2
0.5**
2.4**
3.6**
0.5**
0.0
-2.9**
-1.1*
5.5**
14.3**
-1.3**
-2.6**
1.2
-0.5
0.1
6.2**
-5.1**
-5.8**
Narrow inventions
less number of
inventors;
cumulative
inventions
More likely to be
filed by AngloSaxon applicants
More
frequently filed
in pharma biotech
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Conclusions
‰ Evidence of pre-emptive patenting
o compromising patentability but not contributing to the art
o not necessarily ending into a grant
‰ Evidence on the impact of withdrawn patents
o (very) defensive patenting: applicants playing on uncertainty
and asymmetric information to pre-empt entry into markets
and technologies
‰ Refused patent applications have a profile “in between” granted
and withdrawn applications
‰ Blocking strategies with pre-emptive orientation are more often
found in biotech-pharma
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