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Patents, invalidity, and the strategic transmission of enabling information

Publication ,  Journal Article
Anton, JJ; Yao, DA
Published in: Journal of Economics and Management Strategy
June 1, 2003

The patent system encourages innovation and knowledge disclosure by providing exclusivity to inventors. Exclusivity is limited, however, because a substantial fraction of patents have some probability of being ruled invalid when challenged in court. The possibility of invalidity - and an ensuing market competition - suggests that when an innovator's capability (e.g., cost of production) is private information, there is potential value to an innovator from signaling strong capability via a disclosure that transfers technical knowledge to a competitor. We model a product-innovation setting in which a valid patent gives market exclusivity and find a unique signaling equilibrium. One might expect that as the probability that a patent will be invalid becomes low, greater disclosure will be induced. We do not find this expectation to be generally supported. Further, even where full disclosure arises in equilibrium, it is only the less capable who make full disclosures. The equilibrium analysis also highlights many of the novel and appealing features of enabling knowledge disclosure signals.

Duke Scholars

Published In

Journal of Economics and Management Strategy

DOI

ISSN

1058-6407

Publication Date

June 1, 2003

Volume

12

Issue

2

Start / End Page

151 / 178

Related Subject Headings

  • Economics
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1402 Applied Economics
 

Citation

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Anton, J. J., & Yao, D. A. (2003). Patents, invalidity, and the strategic transmission of enabling information. Journal of Economics and Management Strategy, 12(2), 151–178. https://doi.org/10.1162/105864003766754189
Anton, J. J., and D. A. Yao. “Patents, invalidity, and the strategic transmission of enabling information.” Journal of Economics and Management Strategy 12, no. 2 (June 1, 2003): 151–78. https://doi.org/10.1162/105864003766754189.
Anton JJ, Yao DA. Patents, invalidity, and the strategic transmission of enabling information. Journal of Economics and Management Strategy. 2003 Jun 1;12(2):151–78.
Anton, J. J., and D. A. Yao. “Patents, invalidity, and the strategic transmission of enabling information.” Journal of Economics and Management Strategy, vol. 12, no. 2, June 2003, pp. 151–78. Scopus, doi:10.1162/105864003766754189.
Anton JJ, Yao DA. Patents, invalidity, and the strategic transmission of enabling information. Journal of Economics and Management Strategy. 2003 Jun 1;12(2):151–178.
Journal cover image

Published In

Journal of Economics and Management Strategy

DOI

ISSN

1058-6407

Publication Date

June 1, 2003

Volume

12

Issue

2

Start / End Page

151 / 178

Related Subject Headings

  • Economics
  • 3801 Applied economics
  • 3502 Banking, finance and investment
  • 1402 Applied Economics