Discussion Papers

C2 - Intellektuelles Eigentum, Aneignung von Innovationserträgen und Innovationswettbewerb

SFB/TR 15 Discussion Paper No.


Dietmar Harhoff, Karin Hoisl, Bruno van Pottelsbergh de la Potterie, Charlotte Vandeput
Languages, Fees and the International Scope of Patenting



This paper analyzes firms’ choices regarding the geographic scope of patent protection within the European patent system. We develop an econometric model at the patent level to quantify the impact of office fees and translation costs on firms’ decision to validate a patent in a particular country once it has been granted by the EPO. These costs have been disregarded in previous studies. The results suggest that both translation costs and fees for validation and renewals have a strong influence on the behavior of applicants.


JEL Classification: O30, O31, O38, O57

Keywords: patents, patent fees, patent validation, renewal fees, translation costs

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SFB/TR 15 Discussion Paper No.


Dietmar Harhoff, Sebastian Stoll
Exploring the Opaqueness of the Patent System - Evidence from a Natural Experiment


One of the objectives of patent systems is to disclose information which other agents can build on in further inventions and in their decision-making. While some observers take it as given that real-world patent systems serve this objective, we argue in this article that patent systems are highly opaque and likely to be of limited value as a source of information. We use data from a natural experiment to explore this issue. Requests for accelerated examination used to be publicly observable at the European Patent Office (EPO). Starting in December 2001, the EPO started to treat these requests as confidential information. Using data on acceleration requests which were historically known only to the applicant and the EPO, and later provided to us, we test whether the change in the information regime impacted the actions of applicants and their rivals. We develop a theoretical model of acceleration requests and patent opposition to identify the extent to which the patent system is opaque. We confirm empirically that opposition and acceleration rates of high-value patents change significantly in most technological areas once acceleration requests become unobservable. We interpret these results as evidence that the system is highly opaque in many fields.


JEL Classification: K40, L00

Keywords: patent value; opaqueness; accelerated examination; patent opposition; European Patent Office (EPO).

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SFB/TR 15 Discussion Paper No.


Ilja Rudyk
Deferred Patent Examination


Most patent systems allow applicants to defer patent examination by some time. Deferred examination was introduced in the 1960s, first at the Dutch patent office and subsequently in many other countries, as a response to mounting backlogs of unexamined patent applications. Some applicants allow the examination option to lapse and never request examination once they learn about the value of their invention. Examination loads are reduced substantially in these systems, albeit at the cost of having a large number of pending patent applications. Economic models of patent examination and renewal have largely ignored this important feature to date. We construct a model of patent application, examination and renewal in which applicants have control over the timing of examination and study the tradeoffs that applicants face. Using data from the Canadian patent office and a simulated GMM estimator, we obtain estimates for parameter values of the value distributions and of the learning process. We use our estimates to assess the value of Canadian patents as well as applications. We find that a considerable part of the value is realized before a patent is even granted. In addition, we simulate the counterfactual impact of changes in the deferment period. The estimates we obtain for the value of one additional year of deferment are relatively high and may explain why some applicants embark on delay tactics (such as continuations or divisionals) in patent systems without a statutory deferment option.


Keywords: patent, patent value, value of patent applications, patent examination, deferred patent examination

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SFB/TR 15 Discussion Paper No.


Ilja Rudyk
The License of Right, Compulsory Licensing and the Value of Exclusivity


This paper uses the License of Right (LOR) provision implemented in Section 23 of the German Patent Act to answer the following questions: What is the distribution of the private value of the right to exclude others provided by a patent? What are the welfare implications of having a License of Right system? Section 23 of the German Patent Act grants a patentee a 50% reduction on the annual renewal fees if he voluntarily allows anyone to use the invention only in return for reasonable compensation. We build a parametric discrete choice model of patent renewal and LOR declaration to exploit data on granted German patent applications from 1983-1988. Our estimates show that the distribution of the value of the right to exclude others is very skewed and its relative importance rises with patent age. For most patent owners the exclusion right is very valuable. Nevertheless, for a small fraction of patents a commitment to license non-exclusively may even increase the returns from patent protection. The welfare implications of the License of Right system in Germany are twofold. It increases the private value of patent rights but lowers the patent office's revenues. Furthermore, we are able to distinguish between two motives for declaring LOR, the cost-saving and the commitment motive. The fraction of declarations made out of the cost-saving motive is relatively low for young patents but increasing with patent age. In a counterfactual experiment we simulate the impact of making LOR declarations compulsory. We show that a compulsory licensing system could deprive the

patent owners of a very substantial part of the incentives currently provided by the patent system.


Keywords: value of exclusivity, patent valuation, license of right, compulsory licensing, patent

renewal model

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SFB/TR 15 Discussion Paper No.


Silvia Appelt
Authorized Generic Entry prior to Patent Expiry: Reassessing Incentives for Independent Generic Entry


Patent holders attempt to mitigate the loss of monopoly power by authorizing generic entry prior to patent expiry (early entry). Off-patent competition may be adversely a ected if early entry substantially lowers the attractiveness of  subsequent generic entry. This study assesses the impact of early entry, examining generic entry decisions made in the course of recent patent expiries. Using micro data and accounting for the endogeneity of early entry, I estimate recursive bivariate probit models of entry. Early entry has no significant impact on the likelihood of generic entry. Rent-seeking rather than strategic entry-deterrence motives drive early entry decisions.


Keywords: Generic Entry, Early Entry, Anticompetitive Practices
JEL Classification: L41, I11, O34, C35

April 2010


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SFB/TR 15 Discussion Paper No.


Georg von Graevenitz, Stefan Wagner, Dietmar Harhoff
Incidence and Growth of Patent Thickets - The Impact of Technological Opportunities and Complexity


We investigate incidence and evolution of patent thickets. Our empirical analysis is based on a theoretical model of patenting in complex and discrete  technologies. The model captures how competition for patent portfolios and complementarity of patents affect patenting incentives. We show that lower technological opportunities increase patenting incentives in complex technologies while they decrease incentives in discrete technologies. Also, more competitors increase patenting incentives in complex technologies and reduce them in discrete technologies. To test these predictions a new measure of the density of patent thickets is introduced. European patent citations are used to construct measures of fragmentation and technological opportunity. Our empirical analysis is based on a panel capturing patenting behavior of 2074 firms in 30 technology areas over 15 years. GMM estimation results confirm the predictions of our theoretical model. The results show that patent thickets exist in 9 out of 30 technology areas. We find that decreased technological opportunities are a surprisingly strong driver of patent thicket growth.


Keywords: Patenting, Patent thickets, Patent portfolio races, Complexity, Technological Opportunities.

JEL Classification: L13, L20, O34.

April 2011


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SFB/TR 15 Discussion Paper No.


Otto Toivanen, Lotta Väänänen
Returns to Inventors


A key input to inventive activity is human capital. Hence it is important to understand the monetary incentives of inventors. We estimate the effect of patented inventions on individual earnings by linking data on U.S. patents and their inventors to Finnish employer-employee data. Returns are heterogeneous: Inventors get a temporary reward of 3% of annual earnings for a patent grant and for highly-cited patents a longer-lasting premium of 30% in earnings three years later. Similar medium-term premia accrue to inventors who initially hold the patent rights, although they forego earnings at the time of the grant.


Keywords: citations, effort, incentives, inventors, intellectual property, patents, performance pay, return, wages

JEL Classification: O31, J31

March 2010


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SFB/TR 15 Discussion Paper No.


Richard Weber, Georg von Graevenitz and Dietmar Harhoff
The Effects of Entrepreneurship Education


Entrepreneurship education ranks highly on policy agendas in Europe and the US, but little research is available to assess its impacts. In this context it is of primary importance to understand whether entrepreneurship education raises intentions to be entrepreneurial generally or whether it helps students determine how well suited they are for entrepreneurship. We develop a theoretical model of Bayesian learning in which entrepreneurship education generates signals which help students to evaluate their own aptitude for entrepreneurial tasks. We derive predictions from the model and test them using data from a compulsory entrepreneurship course at a German university. Using survey responses from 189 students ex ante and ex post, we find that entrepreneurial propensity declined somewhat in spite of generally good evaluations of the class. Our tests of Bayesian updating provide support for the notion that students receive valuable signals and learn about their own type in the entrepreneurship course.


Keywords: entrepreneurship, entrepreneurship education, Bayes’ Rule, learning, signals

JEL Classification: D83, J24, L26, M13

August 2009


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SFB/TR 15 Discussion Paper No.


Caroline Haeussler, Dietmar Harhoff, Elisabeth Müller
To Be Financed or Not... - The Role of Patents for Venture Capital Financing


This paper investigates how patent applications and grants held by new ventures improve their ability to attract venture capital (VC) financing. We argue that investors are faced with considerable uncertainty and therefore rely on patents as signals when trying to assess the prospects of potential portfolio companies. For a sample of VC-seeking German and British biotechnology companies we have identified all patents filed at the European Patent Office (EPO). Applying hazard rate analysis, we find that in the presence of patent applications, VC financing occurs earlier. Our results also show that VCs pay attention to patent quality, financing those ventures faster which later turn out to have high-quality patents. Patent oppositions increase the likelihood of receiving VC, but ultimate grant decisions do not spur VC financing, presumably because they are anticipated. Our empirical results and interviews with VCs suggest that the process of patenting generates signals which help to overcome the liabilities of newness faced by new ventures.

Keywords: patents, venture capital, intellectual property rights, R&D, biotechnology
JEL Classification: O30, O34, L20, L26, G24

January 2009


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SFB/TR 15 Discussion Paper No.


Georg von Graevenitz (C2)
Which Reputations Does a Brand Owner Need? Evidence from Trade Mark Opposition


At least two: the reputation of their brand and a reputation for being tough on imitators of this brand. Sustaining a brand requires both investment in its reputation amongst consumers and the defence of the brand against followers that infringe upon it. I study the defence of trade marks through opposition at a trade mark office. A structural model of opposition and adjudication of trade mark disputes is presented. This is applied to trade mark opposition in Europe. Results show that brand owners can benefit from a reputation for tough opposition to trade mark applications. Such a reputation induces applicants to settle trade mark opposition cases more readily.

Keywords: trade marks, opposition, intellectual property rights, reputation
JEL Classification: K41, L00, O31, O34
July 2007


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SFB/TR 15 Discussion Paper No.


Dietmar Harhoff, Stefan Wagner (C2)
Modeling the Duration of Patent Examination at the European Patent Office


We analyze the duration of the patent examination process at the European Patent Office (EPO). Our data contain information related to the patent’s economic and technical relevance, EPO capacity and workload as well as novel citation measures which are derived from the EPO’s search reports. In our multivariate analysis we estimate competing risk specifications in order to characterize differences in the processes leading to a withdrawal of the application by the applicant, a refusal of the patent grant by the examiner or an actual patent grant. Highly cited applications are approved faster by the EPO than less important ones, but they are also withdrawn less quickly by the applicant. The process duration increases for all outcomes with the application’s complexity, originality, number of references (backward citations) in the search report and with the EPO’s workload at the filing date. Endogenous applicant behavior becomes apparent in other results: more controversial claims lead to slower grants, but faster withdrawals, while relatively well-documented applications (identified by a high share of applicant references appearing in the search report) are approved faster and take longer to be withdrawn.

Keywords: patents, patent examination, survival analysis, patent citations, European Patent Office
JEL Classification: C15, C41, D73, O34
October 2006


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SFB/TR 15 Discussion Paper No.


Elisabeth Müller, Volker Zimmermann (C2)
The Importance of Equity Finance for R&D Activity – Are There Differences Between Young and Old Companies?


This paper analyzes the importance of equity finance for the R&D activity of small and medium-sized enterprises. We use information on almost 6000 German SMEs from a company survey. Using the intensity of banking competition at the district level as instrument to control for endogeneity, we find that a higher equity ratio is conducive to more R&D for young but not for old companies. Equity may be a constraining factor for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can relay less on outside financing. The positive influence is found for R&D intensity but not for the decision whether to perform R&D. Equity financing is therefore especially important for the most innovative, young companies.

Keywords: R&D activity, equity finance, small and medium-sized enterprises
JEL Classification: G32, O32
February 2006


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SFB/TR 15 Discussion Paper No.


Paolo Buccirossi, Giancarlo Spagnolo (C2, C6)
Leniency Policies and Illegal Transactions


Forthcoming in the Journal of Public Economics
We study the consequences of leniency – reduced legal sanctions for wrongdoers who spontaneously self-report to law enforcers – on sequential, bilateral, illegal transactions, such as corruption, manager-auditor collusion, or drug deals. It is known that leniency helps deterring illegal relationships sustained by repeated interaction. Here we find that - when not properly designed - leniency may simultaneously provide an effective governance mechanism for occasional sequential illegal transactions that would not be feasible in its absence.

Keywords: amnesty, corruption, collusion, financial fraud, governance, hold up, hostages, illegal trade, immunity, law enforcement, leniency, organized crime, self-reporting, whistleblowers
JEL Classification: K42, K21
September 2005


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SFB/TR 15 Discussion Paper No.


Heiko Gerlach, Thomas Rønde, Konrad O. Stahl (C2)
Labor Pooling in R&D Intensive Industries


We investigate firms’ incentives to locate in the same region to gain access to a large pool of skilled labor. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Agglomeration in a cluster is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms cluster, they tend to invest more and take more risk in R&D compared to spatially dispersed firms. Agglomeration is welfare maximizing, because expected labor productivity is higher and firms choose a more effcient, technically diversified portfolio of R&D projects at the industry level.

JEL Classification: L13, O32, R12
September 2005


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SFB/TR 15 Discussion Paper No.


Stuart J.H. Graham, Dietmar Harhoff (C2)
Can Post-Grant Reviews Improve Patent System Design? A Twin Study of US and European Patents


This paper assesses the impact of adopting a post-grant review institution in the US patent system by comparing the “opposition careers” of European Patent Office (EPO) equivalents of litigated US patents to those of a control group of EPO patents. We demonstrate several novel methods of "twinning" US and European patents and investigate the implications of employing these different methods in our data analysis. We find that EPO equivalents of US litigated patent applications are more likely to be awarded EPO patent protection than are equivalents of unlitigated patents, and the opposition rate for EPO equivalents of US litigated patents is about three times higher than for equivalents of unlitigated patents. Patents attacked under European opposition are shown to be either revoked completely or narrowed in about 70 percent of all cases. For EPO equivalents of US litigated patents, the appeal rate against opposition outcomes is considerably higher than for control-group patents. Based on our estimates, we calculate a range of net welfare benefits that would accrue from adopting a post-grant review system. Our results provide strong evidence that the United States could benefit substantially from adopting an administrative post-grant patent review, provided that the post-grant mechanism is not too costly.

Keywords: patent system, post-grant review, opposition, litigation
JEL Classification: K41, K11, L10
April 2006


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SFB/TR 15 Discussion Paper No.


Katrin Hussinger (C2)
Is Silence Golden? Patents versus Secrecy at the Firm Level


In the 1990s, patenting schemes changed in many respects: upcoming new technologies accelerated the shift from price competition towards competition based on technical inventions, a worldwide surge in patenting took place, and the ‘patent thicket’ arose as a consequence of strategic patenting. This study analyzes the importance of patenting versus secrecy as an effective alternative to protect intellectual property in the inventions’ market phase. The sales figure with new products is introduced as a new measure for the importance of tools to protect IP among product innovating firms. Focusing on German manufacturing in 2000, it turns out that patents are important to protect intellectual property in the market, whereas secrecy seems to be rather important for inventions that are not commercialized yet.

Keywords: Innovation, Appropriation, Patents, Secrecy
JEL Classification: C34, C35, O33, O34
March 2005


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SFB/TR 15 Discussion Paper No.


Simona Fabrizi, Steffen Lippert (C2)
Moral Hazard and the Internal Organization of Joint Research


Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004

We address the question of how the internal organization of partnerships can be affected by moral hazard behavior of their division(s)/agent(s). We explore cases where two entregreneurs, each employing one agent subject ot moral hazard, decide how to conduct a research project together. The project's success probability is affected by agent(s)' effort(s). A joint entity can take two configurations: either both, or only one agent is kept. If two agents are kept, all degrees of substitutability between agents' efforts are considered. We show that the privately optimal internal organization of the joint entity is also socially optimal, except when agents' efforts just start to duplicate each other. In this range, due to moral hazard, too few parterships keeping both agents occur as compared to what would be socially optimal. A restriction on the number of agents to be kept in a partnership would induce too few of them leading to socially worse outcomes.

Keywords: internal organization of partnerships, moral hazard, efforts' interactions, cost functions
JEL Classification: D21, D23, L23
July 2004


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