Offensive Patent Portfolio Races

Abstract

In a patent portfolio race, firms attempt to assemble a large collection of patents. Traditional explanations for patent portfolio races rest on an assumption of fragmented patent ownership where multiple unknown firms employ defensive strategies to forestall holdup. However, patent portfolio races can be observed when patent ownership is concentrated to the hands of a few firms. To explore patent portfolio races under conditions of concentrated ownership we turn to the newspaper printing machine industry, an industry characterized by a few dominant firms. Using multiple sources e patent analysis, archival data, and interviews e we identify antecedents to a phenomenon we label offensive patent portfolio races. Contrary to received wisdom, we find that patent portfolio races can be offensive, aimed at gaining rather than avoiding loss of competitive advantage. Offensive patent portfolio races hinge on the breakdown of cooperation e triggered by changes in the perceived benefits, effectiveness, and/or costs of patents, partly mediated by the adoption of a gain frame towards increased patenting, and regulated by the potential losses from further increases. We explain the behavior by invoking the folk theorem in game theory and conclude that while triggering offensive patent portfolio races may yield temporary advantages, managers are advised to tread carefully as offensive patent portfolio races may have severe implications for the effectiveness and efficiency of the innovation process.