Agenda

Technological Competition and Patent Strategy: Protecting Innovation, Preempting Rivals and Defending the Freedom to Operate
seminar held by Marco Corsino (University of Bologna)

Abstract. The increasing importance of patents for firm strategy goes beyond protecting innovations from imitation — i.e., the traditional patent strategy. Firms also use patents to generate rents by blocking the commercial endeavor of rivals and by preempting substitute inventions (a fence strategy), and to avoid the risk of being held-up by other patent owners or as a bargaining chip in litigation and cross-licensing (a play strategy). Using the resource-based view of the firm and the competitive dynamics perspective, we propose a theoretical framework that explains the association between technological competition and patent strategy. We suggest that a play strategy is more likely when a firm is aware of competitors addressing the same patentable target and that a fence strategy is less likely under those circumstances. However, we suggest also that competition for a patentable target close to its core technology will lead a firm to shift from a play strategy to a fence strategy. We use data from a large-scale survey of European patent applications and find support for our hypotheses.