RESEARCH PAPER
A Note on Patents and Leniency
 
More details
Hide details
1
SGH Warsaw School of Economics, Poland
CORRESPONDING AUTHOR
Adam Karbowski   

SGH Warsaw School of Economics, Poland
Submission date: 2019-08-13
Final revision date: 2019-11-01
Acceptance date: 2020-01-15
Publication date: 2020-03-31
 
GNPJE 2020;301(1):97–108
 
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
The purpose of this note is to investigate the relationship between patents and market collusion. Specifically, by using game theory tools, it is shown that patents can act as a leniency mechanism, i.e., they can enable firms to leave a cartel without the risk of retaliation. However, the socially beneficial role of patents is limited because the Bertrand competition itself breaks the collusion via the existence of a prisoner’s dilemma between sufficiently myopic market rivals. In the prisoner’s dilemma, two social tensions, fear and greed, make firms deviate from collusion. Patenting breaks the collusion, but at the social cost of a temporary patent monopoly in the product market.
FUNDING
This research is supported by the National Science Center, Poland, UMO-2016/21/B/HS4/03016.
 
REFERENCES (53)
1.
Amable B. [2003], The Diversity of Modern Capitalism, Oxford, Oxford University Press.
 
2.
Amir R., Halmenschlager C., Jin J. [2011a], R&D-induced industry polarization and shake-outs, International Journal of Industrial Organization, 29: 386–398.
 
3.
Amir R., Garcia F., Halmenschlager C., Pais J. [2011b], R&D as a Prisoner’s Dilemma and R&D-Avoiding Cartels, The Manchester School, 79: 81–99.
 
4.
Anderson S., Renault R. [1999], Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model, RAND Journal of Economics, 30: 719–735.
 
5.
d’Aspremont C., Jacquemin A. [1988], Cooperative and Noncooperative R&D in Duopoly with Spillovers, American Economic Review, 78: 1133–1137.
 
6.
Barajas A., Huergo E., Moreno L. [2012], Measuring the economic impact of research joint ventures supported by the EU Framework Programme, The Journal of Technology Transfer, 37: 917–942.
 
7.
Baumol W. [1996], Entrepreneurship: Productive, unproductive, and destructive, Journal of Business Venturing, 11: 3–22.
 
8.
Belderbos R., Gilsing V., Lokshin B., Carree M., Sastre J. [2018], The antecedents of new R&D collaborations with different partner types: On the dynamics of past R&D collaboration and innovative performance, Long Range Planning, 51: 285–302.
 
9.
Blind K., Cremers K., Mueller E. [2009], The influence of strategic patenting on companies’ patent portfolios, Research Policy, 38: 428–436.
 
10.
Blind K., Edler J., Frietsch R., Schmoch U. [2006], Motives to patent: Empirical evidence from Germany, Research Policy, 35: 655–672.
 
11.
Boldrin M., Levine D. [2013], The Case Against Patents, Journal of Economic Perspectives, 27: 3–22.
 
12.
Buccirossi P., Spagnolo G. [2005], Leniency Policies and Illegal Transactions, GESY Discussion Paper No. 74.
 
13.
Burr C., Knauff M., Stepanova A. [2013], On the prisoner’s dilemma in R&D with input spillovers and incentives for R&D cooperation, Mathematical Social Sciences, 66: 254–261.
 
14.
Bustinza O., Gomes E., Vendrell-Herrero F., Baines T. [2019], Product-service innovation and performance: the role of collaborative partnerships and R&D intensity, R&D Management, 49: 33–45.
 
15.
Cassiman, B. [2000], Research joint ventures and optimal R&D policy with asymmetric information, International Journal of Industrial Organization, 18: 283–314.
 
16.
Charistos K. [2018], Essays on Economics of Collusion: Cartels, Leniency and Advertising-Selling Platforms, Department of Economics, University of Macedonia.
 
17.
Chattopadhyay S., Chatterjee R. [2019]. Patent Protection and R&D Incentives Under Incomplete Information, Journal of Quantitative Economics, first online, 1–7.
 
18.
Che X., Yang Y. [2009], Patent Protection with Cooperative R&D Option. MPRA Working Paper.
 
19.
Chien C. [2008], Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents, Santa Clara Law Digital Commons 1–1–2008.
 
20.
Chowdhury P. [2005], Patents and R&D: The Tournament Effect. Economics Letters, 89: 120–126.
 
21.
De O. [2010], Analysis of Cartel Duration: Evidence from EC Prosecuted Cartels, International Journal of the Economics of Business, 17: 33–65.
 
22.
Farahani M., Sheikhmohammady M. [2014], A review on symmetric games: theory, comparison and applications, International Journal of Applied Operational Research, 4: 91–106.
 
23.
Förster G. [2017], Innovation als ökonomisches Gut. Ein Essay über die Integrität des Patentsystems, Abhandlung AH 17–01.
 
24.
Giffen R. [1891], The Gresham Law, The Economic Journal, 1: 304–306.
 
25.
Grossmann A-M., Filipović E., Lazina L. [2016], The strategic use of patents and standards for new product development knowledge transfer, R&D Management, 46: 312–325.
 
26.
Harrington J. [2008], Optimal corporate leniency programs, The Journal of Industrial Economics, 56: 215–246.
 
27.
Hellwig M., Hüschelrath K. [2017], When do Firms Leave Cartels? Determinants and the Impact on Cartel Survival, Discussion Paper No. 17–002, Centre for European Economic Research.
 
28.
Holgersson M., Granstrand O. [2017], Patenting motives, technology strategies, and open innovation, Management Decision, 55: 1265–1284.
 
29.
Kamien M., Muller E., Zang I. [1992], Research Joint Ventures and R&D Cartels, American Economic Review, 82: 1293–1306.
 
30.
Kamien M., Zang I. [2000], Meet me halfway: research joint ventures and absorptive capacity, International Journal of Industrial Organization, 18: 995–1012.
 
31.
Kaplow L., Shavell S. [1994], Optimal Law Enforcement with Self-Reporting of Behavior, Journal of Political Economy, 102: 583–606.
 
32.
Karbowski A. [2015], Kartele w trzech perspektywach: neoklasycznej, behawioralnej oraz etycznej, Gospodarka Narodowa, 277: 5–26.
 
33.
Karbowski A. [2017], Kontrowersje związane z moralnym uzasadnieniem ochrony patentowej w biotechnologii, Annales. Etyka w Życiu Gospodarczym, 20: 83–94.
 
34.
Kearney M. [2009], Higher Education, Research and Innovation: Charting the Course of the Changing Dynamics of the Knowledge Society, in: V. Meek, U. Teichler, M. Kearney (eds.), Report on the UNESCO Forum on Higher Education, Research and Knowledge 2001–2009, INCHER-Kassel.
 
35.
Kultti K., Takalo T., Toikka J. [2006], Simultaneous Model of Innovation, Secrecy, and Patent Policy, American Economic Association Papers and Proceedings, 96: 82–86.
 
36.
Kultti K., Takalo T., Toikka J. [2007], Patents hinder collusion. Helsinki Center of Economic Research Discussion Paper No. 144.
 
37.
Langinier C. [2005], Using patents to mislead rivals, Canadian Journal of Economics, 38: 520–545.
 
38.
Marinucci M. [2012], A primer on R&D cooperation among firms, The Bank of Italy Occasional Paper No. 130.
 
39.
Mazzoleni R., Nelson R. [1998], The benefits and costs of strong patent protection: a contribution to the current debate, Research Policy, 27: 273–284.
 
40.
Motta M., Polo M. [2003], Leniency Programs and Cartel Prosecution, International Journal of Industrial Organization, 21: 347–379.
 
41.
Noel M., Schankerman M. [2013], Strategic Patenting and Software Innovation, The Journal of Industrial Economics, LXI (3): 481–520.
 
42.
Penin J. [2005], Patents versus ex post rewards: A new look, Research Policy, 34: 641–656.
 
43.
Penin J. [2012], Strategic uses of patents in markets for technology: A story of fabless firms, brokers and trolls, Journal of Economic Behavior & Organization, 84: 633–641.
 
44.
Pepall L., Richards D., Norman G. [1999], Industrial Organization: Contemporary Theory and Practice, Cincinnati, South-Western College Publishing.
 
45.
Płatkowski T. [2017], Greed and fear in multiperson social dilemmas, Applied Mathematics and Computation, 308: 157–160.
 
46.
Rusch H. [2019], The evolution of collaboration in symmetric 2x2 games with imperfect recognition of types, Games and Economic Behavior, 114: 118–127.
 
47.
Spagnolo G. [2000], Optimal leniency programs. Nota di Lavoro, No. 42, Milano, Fondazione Eni Enrico Mattei (FEEM).
 
48.
Spagnolo G. [2004], Divide et Impera: Optimal Leniency Programs. C. E. P. R. Discussion Paper No. 4840.
 
49.
Sterckx S. [2006], The Moral Justifiability of Patents, Ethical Perspectives: Journal of the European Ethics Network, 13: 249–265.
 
50.
Suslow V. [2005], Cartel Contract Duration: Empirical Evidence from Inter-War International Cartels, Industrial and Corporate Change, 14: 705–744.
 
51.
Whelan P. [2013], Cartel Criminalization and the Challenge of ‘Moral Wrongfulness’, Oxford Journal of Legal Studies, 33: 535–561.
 
52.
Wils W. [2016], The use of leniency in EU cartel enforcement: an assessment after twenty years, World Competition, 39: 327–388.
 
53.
Zhou J. [2012], Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach, Discussion Paper Series of SFB/TR, Governance and the Efficiency of Economic Systems, No. 369, Mannheim.
 
eISSN:2300-5238
ISSN:0867-0005