Simultaneous Model of Innovation, Secrecy, and Patent Policy

Abstract

Multiple innovators can and do come up with the same invention independently. A famous case is the telephone: two hours after Alexander Graham Bell filed a patent application for it, another application for the same invention arrived at the patent office. Many scholars, such as Ilkka Rahnasto (2003) and Hal R. Varian et al. (2004), argue that since Bell’s time, simultaneous innovation has become increasingly common. We feel, and our discussions with industry practitioners confirm, that the simultaneous model of innovation characterizes especially network industries such as consumer electronics, the Internet, software, telecommunications, and payment systems, where standardization limits the possible paths for future technologies and so firms concentrate their R&D activities on the same fields. We suggest that simultaneous or independent invention has major implications for intellectual property (IP) policy. In particular, the possibility of simultaneous innovation changes the patenting decision: firms tap patents for a defensive purpose, since the choice is no longer between patenting or resorting to trade secrecy, but between patenting or letting competitors patent. By exploiting the vulnerability of innovative firms to rival innovation, it is possible to design a welfareimproving patent system that induces innovators to patent rather than keep their innovations secret. Taking the simultaneous nature of innovation seriously also changes the way one should think about the relationship between IP and competition policies.