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| Patent Thicket: Impetus or Barrier in Technological Innovation? |
| ZHANG Meiyang, LONG Xiaoning
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School of Law and Economics, Zhongnan University of Economics and Law;
Intellectual Property Research Center, Zhongnan University of Economics and Law;
Intellectual Property Research Institute, Xiamen University;
The Belt and Road Research Institute, Xiamen University |
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Abstract Innovation is a core element in the development of new quality productivity. As a key institutional arrangement, the patent system encourages and protects innovation by granting patentees monopoly rights over specific technical solutions for a limited time period. In the context of China, most studies have reached the consensus that stronger patent protection significantly boosts innovation. However, it is important to note that patent protection may also bring about various drawbacks of monopoly, including lower consumer welfare and discourage subsequent innovation. Theoretical studies suggest that patent protection either facilitates or hinders subsequent innovation, depending on industrial structure and technological characteristics. Empirical studies indicate that patent protection can impede subsequent innovation in the form of patent thickets, particularly in highly cumulative and patent-fragmented industries such as information and communications technology (ICT). This highlights the profound impact of patent thickets on the relationship between patent protection and innovation.
In the context of the continuous transformation and upgrading of China's economy and the rapid increase of intellectual property protection, is technological innovation being affected by the patent thicket？ Accordingly, should patent protection levels vary based on industrial characteristics and innovation contexts？ And how should we mitigate the monopolistic barriers arising from enhanced patent protection？ There are still many problems worthy of attention. To this end, this paper focuses on the case of patent thickets to explore the monopoly costs associated with patent protection and their effects on subsequent innovation and industry development.
First, based on Chinese patent data, this study draws on the framework established by Graevenitz et al. (2011) to quantify the density of patent thicket across various technological domains in China from 1985 to 2014. The analysis reveals several typical stylized facts: First, from the time dimension, patent thickets in China have witnessed a significant surge around the year 2000. Second, from the perspective of technical field level, the phenomenon of patent thickets has emerged prominently in fields involving complex technologies. Third, from the perspective of enterprise level, the formation process of patent thickets is dominated by a small number of enterprises, while most companies have encountered patent thickets as external uncertainties.
Moreover, this study employs a causal identification strategy based on shift-share instrumental variables to empirically study the effects of monopoly loss costs stemming from patent protection on subsequent innovation and industry development. And our findings include the following: First, the density of patent thickets significantly amplifies the proliferation of utility patents while diminishing the number of invention patents with higher levels of innovative content; Second, patent thickets significantly decrease the quality of innovation; Third, patent thickets lead to a significant increase in the volume of patent transactions, but it will weaken the “quality premium” of patents that are licensed and transferred; Fourth, these effects are particularly pronounced among firms confronted with more important triples, positioned downstream in citation chains, belonging to high technology industries, and located in regions with higher level of intellectual property protection; Fifth, the strategic patent behavior induced by patent thickets has a significant negative impact on both firms' future market value and industry competition.
This study makes possible contributions to the following aspects: First of all, most existing research on monopoly problem caused by patent protection focuses on developed countries. The studies on China is mainly based on theoretical discussion, lacking empirical analysis supported by data. This paper fills that gap by providing macro-evidence from China, examining the monopoly costs of patent protection and its impact on subsequent innovation and economic development, thereby providing empirical evidence from developing countries for existing theoretical research and broadening the understanding of the relationship between patent protection and innovation in economic theories. Besides, by measuring patent thickets across various technological fields in China, summarizing developing law of patent thicket, and empirically exploring the effects of patent thickets on innovation and competition, this paper provides empirical support from China for the global understanding of patent thickets and refines the theoretical framework by providing a dual perspective of both innovation and competition.
Our study also has several important policy implications. First, raising the criteria for granting utility patents is essential to minimize monopolistic gains from strategic innovations. Meanwhile, the patent examination process should be strictly enforced, with higher standards to prevent the abuse of patents that lack sufficient novelty and creativity. Second, build technology trading platforms, patent pools, and promote patent open licenses to reduce the increased transaction costs due to patent hijacking and license fee superposition caused by patent thickets dilemma, thus encouraging enterprises to prioritize genuine R&D. Third, adjusting intellectual property protection levels based on industry development and technological characteristics to balance between fostering innovation incentives and mitigating monopoly costs, promoting industry growth and scientific and technological innovation.
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Received: 06 June 2022
Published: 30 September 2024
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