Strategic Patenting: The Dark Side of Patents

Abstract

Strategic patents have been defined as those whose objective is neither to foster technological
innovation nor to protect said innovation from imitation, but solely to block competitors from
innovating in the same technological area. We provide empirical evidence on these more negative
aspects of strategic patenting. Consistent with theoretical implications of strategic patenting, we
find that when firms strategically patent to defend their market position, overall market competition
declines, as shown by the increase in market concentration. But unlike non-strategic patents, such
patents do not increase total factor productivity or innovative output of competitors via spillovers.
On the contrary, we find that strategic patents are associated with a negative effect on competitor
productivity and patenting activity. These results are robust using different definitions of strategic
patenting.

Keywords: Strategic Patenting, Competitors, Market Entry

JEL Classification: O3, G3