Patent Thickets, right or wrong?

By Severin de Wit

Patents are instituted to provide an incentive to innovate, which is important considering that innovation is a key driver for economic prosperity. Yet, what happens if the company that holds the patent right does not want to produce anything, but instead holds-up other patent right holders? Certain combinations of patent rights, such as the patent thicket, provide an excellent platform for holding-up other firms. The patent thicket arises if one faces a dense and overlapping set of complementary patent rights, wherein at least one patent right is blocking. By blocking complementary licenses in the thicket, the blocking patent right derives strategic value from hold-up, that extends beyond any intrinsic value that a patent right might generate by its innovative contribution. By the possibility of hold-up, the patent thicket could be anti-competitive and decrease the level of innovation and competition in a particular market. The literature on patent thickets and the policies that are developed to counter patent thickets are rather limited.  In 2008 Simone Keunen from Tilburg University wrote her thesis on this subject. She attempts to fill this gap in the literature and to provoke a debate among policy makers, by asking; “Do patent thickets inhibit innovation in theory and in practice?”. Her article, “Unraveling the Patent Thicket, An Economic Analysis Of An Intangible Reality” is worth reading.

[This post originally appeared at ipeg.]