Strategic Patenting and the Tragedy of Anticommons: A Closer Look at Firmss Patenting Behavior

Abstract

Prior research postulates an inconclusive causal effect of fragmentation of property rights on firms’ patenting behavior. On one hand, studies that emanate from concepts such as “patent thickets” and “the tragedy of anticommons” suggest that a dense overlapping set of fragmented property rights can result in technological stagnation and, hence, in a decline in firms’ patenting rate. On the other hand, research derived from such notions as “strategic patenting” argues that firms facing a fragmented external technology market will engage in patent proliferation strategies. In this paper, I develop an integrated theoretical model that captures the main features of both arguments. Indeed, the model posits that firms are more likely to engage in patent proliferation strategies when their technologies draw on patents assigned to a disperse set of outside entities. However, as the overlapping claims of these external right holders increase, the expected infringement costs associated with a patent proliferation strategy may exceed its benefits. The model is empirically tested using panel data of patenting behavior of public firms in the semiconductors industry from 1980 to 1999. The empirical results support the model predictions.