Comments for Patent races: pros and cons

Like Robert Solow said, innovation (without conpting on capital et work) is the only way that can explain growth. Innovation take more and more place in every compagny who is looking for a position of leader of his market. We have seen in previous article that, some compagnies ( the biggest one) could not have the incentive to innovate due to the fact that profit are more benefic to the concurrent than himself. But for providing the well being of the economy and consumers it’s preferable on a moral point ,for them to innovate to maintain their leadership and because they are the only the ones who has the most capacity to innovate contrary to a start up who has less means to do it.

Concerning the race of patent in this article, the smartphone sector is one of the most famous sector where each brand are racing to have the newest innovation that can allow them to have an advantage against his concurrency. The most iconic example is Samsung and Iphone. Every years, the launch of their flagship has brings before to a pattent war and race of patent to capture the new invention made by themself or little start-up they have bought. Beginning from the visual of these phone to this years, where we have seen that Samsung is developping phones with foldable screen, this innovation will be followed by other brand withouh doubt sector as it is very conccurential sector.

Nevertheless discuss about race of patent is for me inapropriate. This races of patent isn’t destinate to everybody. In deed, she has a certain entry cost, and its finaly an inequal race between big firms who had bought the smallest ones.

Take a example A big compagy and a smallest one races for a patent . Even if the smallest win this race or this fight she would certaintly not win the war , because of many fact,
-The means they use to the innovate isn’t the same proportionnaly to the biggest ( the capacity to innovate could take 45 % of means from the smallest firms , whereas it’s only take 15 % for the bigger firm). Wrong innovation could be destructive for the future of the start-up unlike a bigger one who could rebound on something else.

-There could have a certain degree of dependance with big compagnies due to the fact that incentive for a start up to innovate is very important unlike a big one who could have no interest to invest and so far not create transfer of technlogy who could allow start up to develop because of the lack of means they have.

– And the main reason that this is a inequal races is that ,most of the time, when a small firm has a asset who could allow him to change his position in the market (if the patent isn’t already patent trolled by compagny) and his enhance his power in the market ; this last is buy by the big compagny.

All big firms use this technic and moreover it is now the regular way for global firms to improve themself by buying very innovative Start up. By doing this , its allow them to erase the competitors from the market by absorbing them. Apple has for example bought a very innovative israelite (anobit) start up compagny, producing flash memory essential for the his products, by doing this Apple capture all the patent, proceed and technologies created by anobit. It’s the same case in other sectors , Facebook has for example bought Whattapps ( an communication application), not only, for the use the innovative proceed but for erase a concurrent that could be dangerous for facebook..

But it is not necessarly a negative aspect of the capitalism ,even if the purpose of small compagny is to to developp in order to be the newest Apple or Samsung, we can assume the fact that being bought by big firms could be for them a honorable salut. In deed, it could allow them to have finally have the ressources they needed to developp their product and create more innovation and insofar, it can push ourself to ask more about a race of, which start up will be the first to be seen by the biggest compagnies.

https://www.hbrfrance.fr/chroniques-experts/2015/02/6127-la-course-aux-brevets-un-pari-gagnant-pour-les-entreprises/

http://www.cnetfrance.fr/news/galaxy-x-le-smartphone-a-ecran-pliable-de-samsung-fut-discretement-presente-au-ces-2018-39862688.htm

http://siliconwadi.fr/3426/apple-a-absorbe-sa-premiere-start-up-israelienne-anobit

L’innovation is a major issue for businesses. Indeed, it is one of keys factors of growth, competitiveness, wealth, development and progress. Thus, companies use it like a strategic tool, allowing them to consolidate or gain a competitive advantage. As a result, some companies commit themselves in a patent race in which it determines the ressources needed to achieve the innovation.

In the field of technology, one of the fascinating struggle of the last year is artifical intelligence. It is a computer program/robot able to think and reflect by itself beyong its initial programming. AI is a vast field that affects not only computer science but also mathematics, neuroscience and even philosophy. Its development are numerous and sometimes suprising

Let’s start with Google Brain. It is a deep learning led by Google since 2011. The goal of this research would be that the system learns from itself without being forced to inject data manually.

Then we have the Blue Brain project, which is a project developed by the Ecole Polytechnique of Lausanne in Switzerland in 2005. As its name suggests, the concept was to create a synthetic brain.

Furthermore, The NUPIC (Numenta Platform for intelligent computing) developped by the american company Numenta as an open source project for business. Basically, his role would be analyse the events in time and determine causes that could have provoked them.

Another, the CYC (Cycorp making Solutions Better). It is the longest artificial intelligence project in the world. (launched in 1984). It was created in order to develop a large knowledge base. Basically it is possible to learn at CYC principles that will be useful to him to deduce certain things. It may be interesting to add that it is a common digital knowledge that other artificial intelligence might also use.

Then, the Synthetic “Environment for Analysis and Simulations” or SEAS. This AI is currently being used by Homeland Security and the US Defense Department to simulate crises on the US mainland. SEAS allows you to collect real-time data to predict events that may be predicted in the future. Basically, the perfect clone of the real world.

And finally, Mycin, which is an expert system. It would be abble to resonate as an expert in the field of medicine. This one is based on an inference engine. In fact, it makes deductions based on logicial resonance based on facts related to each other is database in order to reduce medical errors but it must still be perfected.

As a result, these different projects have similar objectives : Developing artificial intelligence in all its forms and contributing to technical progress. But it takes time for an artificial intelligence to reach a certain maturity, it also requires heavy investments in research and development and presents numerous uncertainties and critics

Sources :
https://expertsystem101.weebly.com/mycin.html
http://www.dodccrp.org/files/SEAS_Chaturvedi.pdf
http://www.cyc.com
https://www.numenta.org/implementations/
https://bluebrain.epfl.ch

Like Mr. Belleflamme said, it’s not easy to find clear examples of patent races. However, some situations can be considered as patent races because of the number of companies that spent a lot of money to reach the same goal.
Let’s talk about smart home. Nowadays, it seems that innovation has no limits in making the lives of its users more comfortable. From the smart showerhead to the talking fridge, many companies have embarked on this promising market sector. Some big names in Silicon Valley like Apple, Google or Amazon have each filed patents to improve the quality of life of their users by connecting their homes. And it’s not only an american initiative, some french companies also tried to win some market share, like Ween, which developp a central server to improve the security of the house or La Poste, which is developping a smart fridge.
This examples to say that all this companies invested in research and development to get a competitive advantage over other companies. What would happen if all this companies worked together to reach this goal ? They would probably build an entire house absolutly autonomous in several months. But the market being what it is, they all have interest to work alone to be the only one to get this competitive advantage. In my mind, that’s a good example of what a patent race can take away from consumers who would benefit from an autonomous house build faster.
Now the question is how to fix that problem, how to give consumers what they want (like an autonomous house) without depriving companies of the profits they can make on that subject ? Because of course, if the profits are not high enough, no companies will invest in R&D.

I would like to relate this topic about the patent race with the consequences of the inequalities between north and south. Besides the fact that this innovation is good in regard to technological advances, this race brings in my opinion inexorably to a run for the money. Innovation isn’t it also, and primarily, to improve our lives and meet increasing human needs? My example would be the patent war on medical advances around AIDS. The north, with significantly more resources in R & D, doesn’t it serve of these benefits in order to use the Southern Poverty? Many complaints were filed against Brazil and South Africa in the 90s by the US Government or the biggest pharmaceutical firms. These were pursuing both countries, where the proportion of AIDS victims is highly larger than here, for development of generic drugs for free distribution or simply because they are fighting in various ways against the high prices of pharmaceutical lobbies. The arguments of these lobbies are the fact that they charge high prices to offset the costs of R & D. But these groups seem to spend the same amounts on marketing.
I cite this example to demonstrate that the patent race is not especially winning for everyone while innovation appears to be at first sight. The basic inequalities between the different parts of the globe attest well to what I would call rather a “money race.” All these general regulations around patents prevent a part of the population to access these technological advances which should benefit to everyone. These patent races also prevent to the slower developing countries to have time to develop themselves without having to depend on the north. These inequalities persist especially between northern bigger pharmaceutical companies or lobby’s and southern local laboratories which don’t have the same financial resources and which are often “out of the race”.

http://ecorev.org/spip.php?article306

A patent race is a competition between inventors, to innovate a new product first, before its competitors, and get it protected via a patent, so that it can secure a competitive advantage in the market. In the following comment, I will talk about the patent race in the pharmaceutical industry in India.

The case of India is unique, because an average Indian cannot afford brand-name drugs. Due to this, the government here allows the pharma companies in India to “reverse engineer” the drugs, to create their own version of these drugs or generics. This has led to many cases of fights between the firms to sell the drugs in the Indian markets. Example of this was when Natco Pharma was allowed to sell a copy of Nexavar, a cancer drug at 10% of its price, originally developed by German pharma company called Bayer. Similarly, Cipla was allowed to sell its own version of a lung cancer drug made by Roche for 33% of its price. Novartis has sued the Indian government on multiple occasions for allowing the sales of generics, but the government only asked Novartis to lower its drug prices (Gleevec) in return. Indian pharma company Glenmark got into disputes with a number of multinational drug manufacturers. This includes conflict over the copy of the anti-diabetes drug created by Merck and an arthritis drug originally created by Abbott Biotechnology.

This regulation in the country has a two-pronged effect. It helps the average Indian get access to affordable drugs, thus leading to societal benefit. Indian pharma companies have become experts in process innovation, thus leading to lower costs. These process innovations can be adopted worldwide so that the benefits can reach a wider population. However, the other side of this regulation is that it dis-incentivizes product innovation. Indian firms are not motivated to innovate new drugs. because they avoid duplication of the effort. This regulation is also a deterrent for multinational companies to introduce the drugs in India. This affects the accessibility for these drugs for Indian patients.

Thus, this case shows how patents and protection of IP is important to incentivize innovation. The multinational drug companies choose to sell only in those markets, where they have patent protection, allowing them to sell at higher prices and cover the R&D cost invested in the drug. This proposition of higher profits is what motivates firms to spend time and money on innovating new drugs, but it makes these drugs inaccessible to an average person.

Sources:
http://www.fiercepharma.com/legal/merck-scores-victory-india-patent-battle-over-top-diabetes-meds
http://www.financialexpress.com/industry/companies/glenmark-pharma-wins-patent-war-with-abbott/26821/
http://blogs.plos.org/workinprogress/2012/09/12/the-battle-over-generic-drugs-in-india-and-elsewhere/
http://www.reuters.com/article/us-india-medicine-patents-idUSKCN0X918Z

Nowadays, patent races are an undeniable sign of a developing economy, where being competitive is a vital need of every single firm.
In a patent race, in fact, two or more inventors compete (usually by increasing their research expenditures) to discover an invention for the prize of obtaining the patent. This can lead to patents that are neither used nor licensed to others, and also to wasteful investments and duplication of research efforts.

In this context it is important to also consider that bigger firms, such as Apple in the smartphone industry, dispose of a larger amount of resources, which allow the company to fasten the research process and, then, to precede the competitors in this race. As a consequence, the competitive situation of the new emerging companies is deeply affected.
Furthermore, patent race may also influence the quality of the inventions itself, due to the fact that firms have to hurry up in order to be the first and to obtain the patent.
However, the competitive element of patent races can be positive in speeding up innovation processes. Moreover, parallel researches may lead to different results or to the quicker identification of solutions.

In conclusion, competition and innovation are deeply related to each other and the absence of one of them could incredibly affect the achievement of progress in almost every field of the daily life. Anyway, increasing the regulation in the patent system and promoting cooperation among competitors could help to optimize the innovation process and to limit the potential negative effects generated by races.

https://www.innovationpolicyplatform.org/content/patent-races

When it comes to Innovation, it’s always about who will be the first to launch a new invention, or who will invest the most in R&D. This is why we refer to it as a patent race.

Every sportsmen would agree with Dr. Cobanli’s quote : “Competitors push you to achieve more”. This last decade, there have never been so many patents filed and so many different technologies on the market.

In a way, the race for patents benefits to us consumers: a wider range of choice and a variety of technologies available. It also speeds up innovation processes and let firms identify quicker solutions to meet their objectives and target their customers.

However, this patent race can lead to patents that are neither used nor licensed to others and also to wasteful investments and duplication of research efforts.

Probably the most recent example of this is the unfortunate failure of Samsung’s Galaxy Note 7. In order to compete with the iPhone7 and to weaken the sales figure of this release, Samsung wanted to launch a better smartphone with an iris captor and a bigger battery. Managers put intense pressure on every department, including R&D to launch their product before Apple’s. Apparently a little bit too soon – Owners of the Galaxy Note7 smartphone started to notice it smoking and burning. Too much ambition and precipitation has led to one of the biggest recalls in the history of mobile phones.

Last year, the South Korean firm also had to pay 119,6 million dollars to Apple for using Apple’s patented system : the unlocking button on the touchscreen and the of auto-correction function.
This shows how much a company can loose a lot in the race for innovation, in terms of money and in terms of image.

As Peter Drucker said “ The race for quality has no finish line – so technically, it’s more like a death march.”

Sources:

– https://www.innovationpolicyplatform.org/content/patent-races

– http://www.theverge.com/2016/10/5/13175000/samsung-galaxy-note-7-fire-replacement-plane-battery-southwest

– http://www.numerama.com/tech/195371-quand-samsung-veut-a-tout-prix-depasser-apple-le-galaxy-note-7-explose.html

– http://www.developpez.com/actu/105022/Guerre-des-brevets-Apple-renverse-la-precedente-decision-de-justice-en-faveur-de-Samsung-qui-doit-a-nouveau-lui-payer-120-millions-de-dollars/

The patent race can be considerd as a “Rat-race problem” (Hindriks & Myles, 2004). The 2 players, in order to win the all profit, are forced by each other to invest a still greater amount at each period. At the end, we can consider this as a waste for the loosing firm. Knowing that if they agreed not to invest, the outcome would have been the same. But will it really be the same ? The problem with this simplified theorem, is that we don’t consider the finished product. Would have it been such as good if the firms haven’t invested a lot ?

Innovation has an indirect effect which is the opening of new doors for futur innovations. New process leads to a new product which can also lead to another new process. We can observe a ‘domino effect’. The more you innovate now, the more you will be able to innovate tomorrow. The exponential growth in techological advance confirm this theory.

Now considering the ‘present bias’ (O’Donoghue & Rabin ; 1999), we know that people prefer getting their payoffs at the earliest period possible. If the patent race encourages firms to invest more and quicker, the earlier they will innovate and thus the more utility people will get from this innovation. Adding the assumption that today’s innovation accelarate tomorrow’s innovation, we have even more incentives to innovate early. With those two new ideas in mind, we can now put this in a broader perspective. The direct loss of the losing-firm could be counter-balanced with the future gains created by the earlier release of the patent.
The fiercer competition of this patent race will also accelerate the effect of ‘natural selection’ in the market. The non-innovative firms will quit quicker, leaving the place for more innovative and ambitious firms.

The outcome of the patent race is still shady, it will still depend on the market structure and the competition of the market. Despite, we can now assume that, in some cases, the patent race could have a beneficial effect for society. We just need a broader vision.

One question is relevant to ask. Is the quicker innovation going to create a quicker obsolescence of products, encouraging a more fierce consumption and thus create a new externality of overconsumption ? Maybe should we aim for a more durable way to innovate.

Jean Hindriks and Gareth D. Myles (2004). Intermediate Public Economics
O’Donoghue, T., & Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103-124.

Patent races were designed to protect as well as stimulate innovations. And to the end that objective is concerned, they do a perfectly good job. Companies invest a lot of resources in R&D and with no protection, it will not be possible for them to recover their investments and at the end of the day, a firm is an economic agent that is out there to make money. And being the first one to innovate and file a patent grants them with that opportunity.

But I would like to argue that patent races don’t kill off competition and it is certainly not a “winner takes all” situation in many cases. In industries where intellectual property is the main driver of market share, there exist ample opportunities for firms to bring new products and create new market niches like the pharmaceutical industry or the technology industry. Here I’d like to draw on my own experience of working in the Multiple Sclerosis market in the US & Europe. There are 4 companies who produce drugs for MS and no one clearly dominates the market. The reason for that is that there are so many opportunities present to innovate – like the drug dosage, mode of administration (oral or injection), mode of action (pegylation or no pegylation) etc. And by varying the above factors, the companies keep coming out with new, improved drugs, which benefits the patients. Each drug caters to a market niche – there are patients with severe/mild MS, patients with high relapse rates/low relapse rates, patients who prefer oral/injectable drugs etc.

Patent races, in fact, also promote collaboration. We’ll again take the example of pharmaceutical industry, where these days, the trend is to have smaller companies invest resources in R&D and innovate and the larger firms will conduct clinical trials and market the drug. In economic terms, both the firms are now better off and it takes both to a higher level of utility, thus creating a Pareto Optimal situation, which is good.

But, patent races do have their disadvantages. The first is that the firms may not take care of the consumer’s interest, which is evident in the sky-high drug prices in the US, because their they can extract high rewards through their market power. But, this can easily be taken care of by strengthening Intellectual Property laws or putting a price ceiling. Take for example India, which is a country that doesn’t have a state provided insurance for its citizens. So, their laws prohibit the drug companies to price their drugs at their desired level. Also, it is not easy to get a new patent granted with only minimal changes in already patented drugs, something that was seen when Novartis failed to get a new patent for its cancer drug, Glivec. As a result of such restrictions, the drugs are within the reach of most of the citizens.

So, in my opinion, patent races do have their pros and cons, but from where I stand, there are more pros than cons and in the long run, patent races help in improving the well being of society as a whole.

References:

[1] http://www.theglobeandmail.com/report-on-business/small-business/sb-money/big-pharma-turns-to-smaller-firms-for-innovation/article12751137/

[2]http://www.wsj.com/articles/SB10001424127887323296504578395672582230106

[3] https://www.parexel.com/parexel-insights/innovation-pharmaceutical-industry-change-toward-personalized-medicine

[4] https://www.innovationpolicyplatform.org/content/patent-races

[5] http://dspace.mit.edu/bitstream/handle/1721.1/2522/SWP-3710-31904694.pdf?sequence=1&origin=publication_detail

A patent race is defined as « two (or more) firms pursuing the same goal; to this end, they choose how much R&D resources to invest in view of being the first to reach the objective and so, to file a patent so as to secure a dominant position in the market. »

As we can read on « The Innovation Policy Platform », there are actually two kinds of patent races: the standard races and the asymmetrical races.

– The standard races occur when « the winning firm obtains the patent and the other firm loses its R&D expenditures. »

In the pharmaceutical sector, this is a good point. A company can exclude competitors for a certain time so that it is possible for it to recover its investments in research and development. In this case, the patent is really useful because it will rapidly offer innovation to consumers. It will therefore improve the social wellbeing. But we don’t have to neglect the sunk investments.

– The asymmetrical races occur when « an incumbent firm tries to prevent a rival from filing a patent first and thereby avoid competition in order to maintain its monopoly. »

A big and well-known example for this kind of patent race is the big battle between Apple and Samsung. These companies abuse of litigation to keep away the concurrency and use huge resources to defend themselves in the courts. This is a ‘lose-lose situation’ because they won’t improve their innovations by focusing on the competitors. On the contrary, companies should use other’s ideas for further innovation. Besides, in this sector, the patents may become ridiculous because the technology moves so fast that the patent could be accorded when the new technology is obsolete. Without saying that this kind of innovation doesn’t really improve the consumer welfare, it only benefits a certain percentage of the population.

As a conclusion, the patent system exists to encourage innovation but we have to find an equilibrium between the benefits of quick innovation and the costs generated by this kind of races. It would be a good idea to reward companies that work together to find better and more efficient results.

Sources:
https://www.innovationpolicyplatform.org/content/patent-races
http://wadhwa.com/2016/03/05/why-apples-defeat-to-samsung-was-a-victory-for-innovation/
http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/staff_working_paper_part1.pdf

One recent example of firms engaged in patent race is Tesla and Google with their autonomous cars. Indeed, these firms are willing to come up with an autonomous self-driving car as soon as possible. Efforts in developing a driverless car have been increasing in the past few years. Nowadays, many cars manufacturers and other technology companies have entered the autonomous cars patent race.

On the one hand, Google is investing huge amount of money in R&D since 2012 in order to develop prototype vehicles. According to the search engine company, this innovation will benefit society by reducing traffic incidents, allow for more independence and reduce the time spent in commuting. On the other hand, Tesla and other car manufacturers such as Volvo have started to invest in R&D as well aiming at developing a completely self-driven car before their main competitors will do so. Uber, the famous platform that match drivers and customers, has recently decided to join the race as well.

As many firms tends to join the battle with the ambition to be the first one to produce a self-driving vehicle, the market for personal transports seems to be attractive from an innovator’s point of view. However, one can ask if this wasteful duplication of effort is relevant from the society’s point of view. Is it really justified that many firms spend huge amount of money on R&D expenditures while only one company will win the race with the only benefit being that these patent races increase the speed at which innovation occurs?

References :

http://www.techtimes.com/articles/168338/20160704/tesla-vs-google-both-in-the-self-driving-car-race-each-with-its-own-approach.htm

http://www.ipwatchdog.com/2016/04/07/autonomous-cars-patents-perspectives/id=68045/
https://www.google.com/selfdrivingcar/

http://www.economist.com/news/business/21707600-battle-driverless-cars-revs-up-whos-self-driving-your-car

http://www.economist.com/news/leaders/21706258-worlds-most-valuable-startup-leading-race-transform-future

As we know innovation and competition are closely linked. Competition affects innovation, indeed the incentive to innovate depends on the market structure. And in the same way, innovation is used as a tool to have a competitive advantage.

To innovate firms invest in R&D, to be sure to collect the money from their new inventions firms use patents.

Patents have positive and negative effect. It can motivate the innovation but it can also be a source of waste when different firms invest for the same purpose because at the end only one firm will earn money from its innovation.

An example of a very know patent race is found in the smartphone industry. The concurence in these markets progress with new manufacturers (LG,ZTE,Lenovo,..).Moreover these markets are in recession. It’s why to stay competitive in these markets they have to innovate or to be more effective than the other (fast processor, improve the quality of the photo,…). Patent is then really usefull for the firms which invest to innovate. Patents protect them against counterfait.

An exemple : Samsung is the leader of the smartphone industry with Apple. To stay competitive on the market, samsung has to stay at the edge of the technology. In 2015, Samsung spent 14,1 billions in R&D.

On the 22nd of july 2016 Samsung Electronics announced that they sue Huawei (third worldwilde in smartphone) in Pékin. Samsung accused Huawei of 6 patents infringements. Samsung demands 24,14 million dollars in damage.

However, patents are not always use for protecting themself. In these case, is it a revenge from Samsung?

Indeed , in May 2016, Huawei sued Samsungn stealing 11 patents (4G, operating systems, software interfaces,…). According to Lee Dohoon, CIMB analyst, the objective wasn’t the money but the publicity made by these case.It was a marketing strategy.

sources :
– https://www.ipdigit.eu/2014/11/patent-races-pros-and-cons-2/, consulté le 11 octobre 2016.
– http://www.lesechos.fr/tech-medias/hightech/0211153971234-samsung-poursuit-le-chinois-huawei-pour-violation-de-brevets-2016628.php, consulté le 11 octobre 2016.
– http://www.lesechos.fr/tech-medias/hightech/0211153971234-samsung-poursuit-le-chinois-huawei-pour-violation-de-brevets-2016628.php, consulté le 11 octobre 2016.
– http://www.developpez.com/actu/101672/Samsung-poursuit-Huawei-pour-violation-de-brevets-une-bataille-mediatique-pour-booster-les-ventes-de-smartphones/, consulté le 11 octobre 2016.
– http://fr.reuters.com/article/technologyNews/idFRKCN1020OL?pageNumber=2&virtualBrandChannel=0, consulté le 11 octobre 2016.
– http://www.commentcamarche.net/news/5863135-samsung-et-apple-en-tete-du-marche-des-mobiles-mais-la-concurrence-augmente, consulté le 11 octobre 2016.

Innovation is used by a firm as a strategic tool to outperform its rivals. That’s the reason why many firms usually compete against one another to discover inventions first and get patents protecting their findings. On the one hand, this can lead to wasteful investments in R&D but on the other hand, it can speed up the innovation process and yields different results. The process just described above is typically referred as a “patent race” where each company invests in R&D in hope of obtaining a patent. One can be wondering whether such races are beneficial for the society seen as a whole as firms might be investing too much or too little on R&D expenditures. It also raises the question of whether patents should be made shorter, longer, narrower or broader.
These questions have been examined over and over again and yield complex results. The patent system must be designed to encourage innovation while carefully weighing the benefits of quick innovation against possible harmful costs generated by races (Judd et al., 2011). The point I will develop here is that this problem should be addressed industry by industry. With an increasingly growing complexity in modern technologies, the patent law are not always well suited for some industry. Let’s take a deeper look at the 3D printing industry to illustrate my point.
Contrary to popular beliefs, the 3D printing industry has been around for a while and most patents were issued before the turn of the century and are now reaching their lifespan. The main implication is that many established companies now seek to protect their market share from an increasing number of entrants. As a result, we have seen an increasing number of companies going to court for patent infringement these last few years. If we look at the price of 3D printers on the market now compared to 15 years ago, one quickly realizes their price has dropped significantly. These machines are also more efficient than in the past. In my view, this drop in price and increase in efficiency could have happened sooner if only companies had invested more in R&D to develop the 3D printer back in the days. Hence, from a social point of view, there weren’t enough companies investing in R&D and racing for a patent which led to low performance and a high price (unaffordable for most people). In this case, it might have been better if regulators had put in place mechanisms to encourage companies to invest more in R&D (lower taxes, etc). In this specific industry, had the regulators understood the pros of a patent race, they could have created an environment suitable for companies to encourage them to invest more in R&D. As a result, the price of 3D printers might have dropped sooner and they would be more common on the market nowadays.

Sources :
https://www.innovationpolicyplatform.org/content/patent-races
https://3dprint.com/151221/envisiontec-formlabs-ip-view/
https://techcrunch.com/2016/05/15/how-expiring-patents-are-ushering-in-the-next-generation-of-3d-printing/

Of course, patent races are useful in order to protect intellectual property. It takes a lot of time and resources to find something new, then why should the company not be rewarded for it?

It always goes about profitability and competition. Yes, it is important but organizations forget (too) often the final consumer. We should not forget that patents create situations of monopoly which are not good at all for consumers.

Let’s take an example: some drugs are now so expensive that poor people cannot offer those for themselves. Why is that possible? Because there is no rules or control on how companies set their prices. In some markets like this one, profits should not come first but social benefit should…

Collaboration may help companies to reduce their R&D investments: a company can cooperate with another competitor in order to spread the costs. If costs are reduced, it also means that they can set their price at a lower value. I will describe this with an actual example: Microsoft and Toyota are actually working together in order to create/research on intelligent energy consumption (see CO Business 2013).

And then, it will introduce new issues as threats not to collaborate any more, would it be more profitable for me to go alone… Companies will always be guided by profitability. Social and money should be linked into a new kind of profitability and then taken into account by managers.

Sources :

https://www.monde-diplomatique.fr/2012/08/BAKER/48031

http://web.stanford.edu/~judd/papers/OptimalPatentRules.pdf

ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/Bla04057.pdf

http://www.co-society.com/wp-content/uploads/CO_business_2013.pdf

The history will remember that it is G.Bell who was the first to invent the phone. But he was not the only one. His concurrent E. Gray also invented a phone but nobody has ever heard of him. Why ? Because Bell reached the patent office a few hours before Gray. This example shows all the importance of the patent race. But that was in 1876! Nowadays, is this race still profitable and meaningful?

For some reasons I will say that patent races have more cons than pros. In our economy the patents are no longer seen as protection tools but more and more as financial objects (1). Some companies are just creating and buying patents in a unique objective: make the maximum money out of it. They give property rights in exchange of high royalties and fees. With all those “Patent trolls” the innovators are blocked, it becomes such harder for them to do their jobs. When you know that the patent trolls are making the work of innovator harder and that the innovation is a way to make economic growth (2), we can conclude that patent races are negative for our occidental economy which needs growth to get out of the crisis.

We can find other examples in the pharmaceutical industry. This one is known for their massive Investments in research and development, always looking for new drugs. In the past the patent races were really useful in this sector. It allows companies to make a lot of benefits by being the only producer of a drug. But at the end of the 20th century the “Big Pharmas” decided to reduce their R&D costs (3). So a new economic model appeared. SMEs pharma are developing the drugs and the big pharma put the commercialization and the production into place. The patent race is no longer needed because we have a “win-win situation” between companies. This model avoids waste of time and money.

We can see that over the years, the perception of patent as changed. But in a time of crisis the patent races are negative because the economy needs innovation to create growth. We need to come back to the basic and not use the patent as a financial object.

References:

(1) http://www.lecho.be/entreprises/general/La_course_aux_brevets_peut_elle_tuer_l_innovation.9666520-7773.art?ckc=1&ts=1444229828
(2) http://www.hbrfrance.fr/chroniques-experts/2015/02/6127-la-course-aux-brevets-un-pari-gagnant-pour-les-entreprises/
(3) Ernst & Young quoted in the Economist June 4th2005, Fortune March 20, 2006, p.82

After going through the text pros and cons of patent race, i would like to define patent race again. A patent race is a competition between two inventors (usually firms) to discover an invention first in order to obtain patent protection for the invention and exclude competitors. A good example for me is the pharmaceutical industry where firms go into agreement with smaller firms for example to delay the sales of cheaper drugs which as a result is detrimental to the welfare of its customers but beneficial to the both firms in terms of profit.
Secondly, if these firms come out with new drugs to treat illnesses like Aids after spending much time in R&D, instead of delaying sales, it will make the firms to be more efficient. As a result, some of these new drugs can treat more illnesses effectively like the case of Aspirin is a good examples of treating multiple conditions starting from headaches to particular types of cancer and to know, it is the one of the drugs that is highly used worldwide.
To conclude,patent races is the main challenges faced by innovative companies today which help to encourage innovation but it involves a lot money in the R&D process.

The article deals with the pros and cons of patent wars from a company perspective but it does not explain what are the concrete impacts of a patent war on the customers. Indeed, the relevance of such a legal system can be questioned from a customer point of view.

The widespread belief is that a patent system spurs innovation, as firms are likely to engage in a fierce competition to be the first one to successfully file a patent. It is true that, in such a situation, companies are expected to invest massively in their Research & Development activities to be at the forefront of innovation. Consumers and the society as whole will therefore benefit from cutting edge technology. In this respect, it can be assumed that competition and patent wars support innovation.

However, by seeking to be the first firm on the market and aiming to offer a state-of-the-art product or technology to consumers, companies can transform themselves into a pattern troll. This phenomenon has harmful impacts on big businesses and affects the citizens’ daily life. Nowadays, every product is covered by patents. By way of example, more than 250,000 patents cover smartphones, and Wifi routers have tons of patents associated . Some companies benefit from this situation as it prevents them from competition. To do so, they sympathetically insert abusive patents in the process or in the product. The very first impact for the consumer appears at this stage as costs of abusive patent’s assertion in a product are recouped in the selling price.

Due to the large and abusive number of patents by product, it seems rather difficult for a company to refrain itself of infringing patents. In order to save their competitiveness, the enterprise can decide to pay a licensing fee. Moreover, it can be assumed that the company will have to pay the cost of lawsuits. As a consequence, costs will be either charged over the consumers as the selling price will increase, or the company will soak up the given costs . In a nutshell, when competing for patents, companies are likely to loose precious time and money as they might cope with higher costs, which could also give rise to employment restriction .

More importantly, the quality of patents can also be questioned. With intent to be the first one on the market, companies rush to protect themselves from competition via patents. The patent is therefore not always well elaborated. Needless to mention that in such a situation, the first ones who will hold the bag are the consumers, as they will enjoy a low quality product . Besides, innovation is not fostered at all.

About Innovation, patent war also hampers consumers from new technology . Indeed, when a company protects its products with patents, other competitors cannot offer more sophisticated and diversified goods. As a consequence, there are fewer products on the market.

A key example is the Apple and Samsung case. These leader brands were in an unprecedented battle regarding the infringement of technology patents used in their products, namely smartphones and tablet devices. According to Vincent Lotempio, any company that faces such a situation has three options: “Discontinue the product in the applicable jurisdiction. Pay a licensing fee to the patent owner and to continue to sell the product. Create a new model of the product which no longer infringes on the patent in question” . The two companies finally decided to drop patent infringement procedure because of the significance of both costs and consequences (blocked markets, unwilling to lose market shares, the costs,…).

As a conclusion, I share the view of Bartees Cox. We deeply need a comprehensive legislation, which encourages innovation, decreases abuse and paves the way for more affordable technology . It is worth noticing that, as underlined in the present article, patents can generate a wasteful duplication of efforts. I recently heard about a new way of stimulating innovation. This new trend tends to, inter alia, play down the wasteful duplication effort. This new technique, called “open innovation”, consists in innovating with its competitors in order to reduce costs, investments and share knowledge. What a good topic for a master thesis!

Bibliography:

COX, B. (2014). Consumers need protection from patent trolls. The Hill. Online http://thehill.com/blogs/congress-blog/judicial/202688-consumers-need-protection-from-patent-trolls. See on 6th October 2015.

LOTEMPIO, V. (2013). The impact oof the Apple-Samsung patent wars. The Manzella report. Online: http://www.manzellareport.com/index.php/manufacturing/700-the-impact-of-the-apple-samsung-patent-wars. See on 5th October 2015.

PARKER, T. (2011). Patent wars and their effect on your wallet. Investopedia. Online:
http://www.investopedia.com/financial-edge/0811/patent-wars-and-their-effect-on-your-wallet.aspx. See on 5th October 2015

By asking the question of the pros and cons of the patent races, we also ask the question of what degree of competition within an industry leads to optimal performance. Firms compete to introduce the innovation that can be modelled as a noncooperative game. Some conclusion can on this basis be taken. The first one is that the number of industries on the market has an influence on the firm investment that will decrease if the number of industries increases. Another conclusion is that with a fixed market structure, the investments in R&D will exceed the social optimal.

But patent races are still heavily linked with innovation, in this optic you have to distinguish two kinds of patent races: there are the standard races, all the firms invest in R&D and only the one finding the innovation obtain a patent and there are the asymmetrical races in which the incumbent firm wants to avoid competition by maintaining its monopoly on the market by obtaining patents before any other firms.

In standard patent races, the investments in R&D are often higher and this kind of races speeds up the invention process. But as it is said before, a lot of investment will be lost for the firms that never obtained a patent. This money could have been use in another department. This is why those standard patent races are not always seen as healthy from a social perspective. The other big disadvantage is that, as there is competition between firms, they are less disposed to share information. For the asymmetrical patent race, the main problem is that the leader of the market does not always want to exploit the patent once he wins it. In order to prevent firms to win a patent they can use sleeping patents for a while.

As we can see on the drug firms, you have a lot more power when you are the first one to obtain a patent. In this industry, you can even patent a drug before it is proven that it will be safe and efficient for the consumer. The patent race permit to innovate a lot but it is obviously not the best way to do if you want to maximise the social welfare of the industry and of the customers.

Harris, C. and Vickers, J., (1985), Patent Races and the Persistence of Monopoly, The Journal of Industrial Economics, Vol.33, No.4, pp. 461-481.
Judd, K., Schmedders, K. and Yeltekin, Sevin, (2012), Optimal Rules for Patent Races, International Economic Review, Vol.53, No.1, pp. 23-52.
Lee, T. and Wilde, L., (1980), Market Structure and Innovation: A Reformulation, The Quarterly Journal of Economics, Vol.94, No.2, pp. 429-436.
Loury, G., (1979), Market Structure and Innovation, The Quarterly Journal of Economics, Vol. 93, No.3, pp. 395-410.
https://www.innovationpolicyplatform.org/content/patent-races, consulted on 07 October

First of all, I wanted to underline the fact that being the first to invent and patent something isn’t a sufficient condition to the success of an innovation. Indeed, it has to be accepted by the customers. This means that the “Patent Race” has to be a race about products that that increase the perceived value for the customers. Therefore, an innovation should have the following features. First, it has to be testable: if customers have the opportunity to try the product, they will more easily see the benefits of it. Second, the innovation has to be observable: if I see others adopted a new product and that they trust this product, I’ll be more tempted to buy the product. Third, the innovation has to be easy: if there’s too much to learn before using the innovation effectively, people would rather keep the old product. Finally, it has to be compatible: an innovation that doesn’t disrupt routines is more likely to be adopted than a disruptive one (Schumpeter called this the creative disruption of innovations). These factors influence the time of adoption and the longer the adoption time, the riskier the innovation because of uncertainty. Then, the innovator also has to convince stakeholders. The latter have too perceive the value of the newness.
Thus, even if an innovation is patented, we see here that its success doesn’t depend only on the market structure or on being the first one in the race. A competitor could invent something that is more testable, easier to use, more compatible and more observable than our patented innovation. His new product or process will succeed better than ours.

An example of domain where the patent race is really present is the online retails shops. I think for instance about Amazon. The company has lots of patents on new technologies that aim a real online experience for customers and make their life easier (they also have plenty of other patents but I won’t focus on these here). They have for instance a patent called “Gaze-Based Content Display”, in which they found a way to highlight elements of a web page that customers want to see, in function of which part of the screen they look at. An other example is the innovation patented under the name “System for Enabling Electronic Catalog Users to Create and Share Research Data”. This patent protects an innovation that permits feedback on the products people buy and try. There’s also a protected innovation that allows to look for items that have positive feedback. All these examples of patents, among others, allow Amazon to offer a unique online shopping experience, and to remain a leader in this domain.
(source: http://www.ipwatchdog.com/2014/03/08/amazon-patents-focus-on-online-shopping-experience/id=48342/ )
In this case, I would say that competition in the raising online shopping market fosters innovation. Think about Zalando or other retailers that launch a business online. If Amazon doesn’t innovate and protect its innovations, it’s likely that they quickly won’t be a leader any more. But we didn’t get there yet.

The impact of patent races on welfare creation are, theoretically, hard to assess.

On the one hand, as explained by Lévêque and Ménière (2004), “the “winner takes it all” situation triggers patent races, with the result that the future value of an innovation is squandered on R&D investments.” In order words, when there is no limit on the number of firms that can enter into the race, the number of firms tends to be larger than the social optimum. There happens what is called a wasteful duplication of R&D efforts. The same authors also explain that, even when the race isn’t freely accessible (because of a lack of knowledge or if the industry has a small number of players), this problem of excessive investment still occurs because the players tend to make stronger efforts.

On the other hand, as explained on The Innovation Policy Platform [2], “the competitive element in standard patent races can be positive in speeding up invention processes.” More firms means more chances of finding the right technology and ultimately this gives customers access to new technologies. Also, the duplication of R&D efforts does not always take place: “results may ultimately lead to different products or to the quicker identification of solutions than in the absence of competition in research efforts.” We can expect that the latter assertion holds true in industries where the products are rather heterogeneous or when multiple solutions exists to reach a certain objective.

As it is quite often the case when we want to analyse the ins and outs of an economic issue that has no clear-cut answer, the theory cannot put a final word on the issue and empirical analysis is necessary to understand how different environments may lead to different answers.

The case I have decided to cover is quite specific but still, in my opinion, very insightful. It concerns two companies: Medtronic and Edwards Lifesciences. Both companies make their business in a very specific market: they provide medical technology for the interventional and surgical treatment of cardiovascular disease.

Recently, they have been competing for obtaining an exclusive patent on their transcatheter aortic valve replacement (TAVR) product. In this race, it is Edwards who won by being the first to place a patent on its Sapien transcatheter heart valve. However, the race didn’t stop there: the winner didn’t take it all. Medtronic finally launched its own TAVR in 2014, named CoreValve. As one might have expected, Edwards didn’t stand around doing nothing. Edwards sued Medtronic on having infringed on one of its patents. Medtronic counterattacked Edwards by stating that “CoreValve system is a safer device and that patients in whom it is implanted have better outcomes with a lower risk of death. Edwards’ competing device cannot serve individuals with aortic annuli larger than 25 mm, leaving some patients without a viable treatment option.” [3] In other words, even though CoreValve is in many aspects resembling to Edwards’ device, it covers more specifications and thus deserves to be available on the market.

In May 2014, the two companies reached a global patent settlement agreement in which Medtronic had to pay a fixed fee of $750 million as well as royalty payments until April 2022. Both parties have also agreed that “neither party will sue the other for patent matters anywhere in the world for eight years in the field of aortic and all other transcatheter heart valves.” [5]

To conclude, what does this example teach us about patent races?

First, even if you lose the patent race, you can still survive. All your R&D investments are not lost if your product is somewhat differentiated from the winner’s one: wasteful duplication does not always happen. Medtronic has been able to survive the race and to propose its device to the world.

Second, in very specialized races, not everyone can participate and less wasteful efforts take place. In this example, only two companies participated in the race, hence minimizing the social cost of the patent competition.

Third, patent races, when they result in different products or solutions, are very beneficial as they speed up the appearance of several technologies covering needs that are somewhat different. In this case, doctors and patients can enjoy two different solutions covering not exactly the same situations.

Finally, being the first one can be beneficial even if you don’t stay alone at the end of the race. Indeed, you can fill a patent first and try to reap the profit of the rivals by suing them into court, what Edwards has done.

References:
[1] Lévêque, F., & Ménière, Y. (2004). The Economics of Patents and Copyright. Berkeley Electronic Press.
[2] The Innovation Policy Platform. Patent races. https://www.innovationpolicyplatform.org/content/patent-races
[3] Wasserman, E. (2014). Medtronic and Edwards Lifesciences settle the score in ongoing patent feud. http://www.fiercemedicaldevices.com/story/medtronic-and-edwards-lifesciences-settle-score-ongoing-patent-feud/2014-05-20
[4] Husten, L. (2014). Medtronic To Pay Over $1Billion To Settle Patent Litigation With Edwards Lifesciences. http://www.forbes.com/sites/larryhusten/2014/05/20/medtronic-to-pay-over-1billion-to-settle-patent-litigation-with-edwards-lifesciences/
[5] Medtronic. (2014). Medtronic Settles Global Patent Litigation with Edwards Lifesciences. http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=1932573&highlight=
[6] Parmar, A. (2014). Edwards Lifesciences CEO: Medtronic Not As Aggressive in Early Launch of CoreValve. http://www.mddionline.com/article/edwards-ceo-medtronic-not-aggressive-early-launch-corevalve-73014

According to Joseph Zeira, patent races appear when 2 conditions are met: the potential innovations differ in costs and innovations are searched simultaneously. They also add the concept of duplication of innovative activity that is a consequence of patent races. Duplication can explain the reduction of the effect of scale on growth, which is Pareto-inefficient. Moreover, when there is risk aversion and that the patent is very risky, it can lead to insurance effects which consist of risk sharing through capital venture or increase the number of team for research. The aim of this is well to be the first to find the innovation. However, as a result, it involves more R&D but lower growth rates. Another finding is that the emergence of patent races can occur when the cost of innovation is low, which leads to more research team and thus a higher return for the low probability of success. It’s also highlighted that there are more research in low cost innovation despite high cost innovation are under-researched.
http://search.proquest.com.proxy.bib.ucl.ac.be:8888/abicomplete/docview/867331953/5AF5ADCD71D0454BPQ/4?accountid=12156
One of the positive points of patent races is that it increases the chances of the innovation’ findings, due to the fact that more than one team work on the same innovation rather than on another. However, it can involve that there is no diversification in research areas and it represents few innovation for loads of researches.
An element that I would like to emphasize is that according to Arrow and Schumpeter’s theory an optimal market structure should result in dynamic competition driven by the goal of achieving a monopoly. In fact, both monopoly and perfect competition markets individually would not lead to innovation incentives. However, they have both their strengths to create innovation. Big firms have the capacity to finance R&D costs but could suffer from no innovation incentives as the competition is weak. So I completely agree that companies in a competitive environment where the monopoly is achievable are willing to invest in R&D to attempt that position and beneficiate of patents to have return on their investments. The complexity of this solution remains in the settings of the patterns (how many years, what is involved?). By the way, as said in Belleflamme’ courses, it’s also necessary to assess how the intensity of competition affects incentives to innovate. That is, we have to consider three variables: the number of firms, the degree of product differentiation, and the type of competition (price or quantity).
One of the examples is pharmaceutical industry where patent races are ubiquitous. In that case, there must be equilibrium between competition and monopoly in the sense that competition is needed to lead to more innovation and monopoly is also needed because it represents the incentive for competitive firms to innovate. If there wasn’t patent, there would be less competition and so, less types of drugs for people, which would reduce the welfare of the population. But if there were too much patents leading to monopoly, drug’s price would be too high, which would also reduce the welfare because less people would be able to buy drugs. That’s why, it’ really important to set the characteristics of the patent like the duration, the breadth, the entry barriers …

Before developing an example of patent race, I would like to add one element to the patent races effects cited in Professor Belleflamme’s post: the business stealing effect. This effect comes from the fact that the introduction of a new product will make older existing products obsolete, reducing incumbent firms’ profits. This loss in profits is not considered by the innovator in its decision to invest in R&D. Therefore, because of the business stealing effect, firms engaged in a patent race may invest too much compared to what is socially desirable. (Régibeau, 2004)

Within the context of patent races, a situation of simultaneous invention can occur (Lemley, 2011). This is the case of Edison’s light bulb or Bell’s telephone. Since these two inventions have already been covered in other posts, I will focus on another famous case: the Wright Brothers’ airplane.

In 1903, the Wright Flyer becomes the first machine capable of a controlled, sustained flight with a pilot aboard (“The Wright Brothers & The Invention of the Aerial Age”). A patent on its flight control is granted, which will be used by the American inventors, the Wright Brothers, to defeat all alternative aircrafts developed shortly after (Lemley, 2011). This led to a patent war that suppressed almost all aviation development in the U.S. until World War I (Boyne, 2008). As we can see, the litigious nature of an inventor can have the effect of stifling innovation, just as patent trolls (Belleflamme, 2011).

Moreover, no invention comes from the void. In the airplane example, several aviation experts argue that the first contribution to the idea of a flying machine dates back at least to DaVinci, while the Wrights invented only a particular improvement to the knowledge available in 1899: “a way of warping a wing to control the direction of flight while turning a rear rudder to counterbalance the effect of bending the wing, maintaining the stability of the plane”. However, the patent granted to the Wright Brothers was much broader than this particular improvement (Lemley, 2011).

These are two of the reasons why a patent has to be granted with caution, and its breadth carefully defined.

References:

“The Wright Brothers & The Invention of the Aerial Age”. National Air and Space Museum. Retrieved from http://airandspace.si.edu/exhibitions/wright-brothers/online/

Belleflamme, P. (2011) “What to think of ‘patent trolls’? The return”. Retrieved from https://www.ipdigit.eu/2011/10/what-to-think-of-patent-trolls-the-return/

Boyne, Walter J. (2008) “The Wright Brothers: The Other Side of the Coin”. Retrieved from http://www.wingsoverkansas.com/boyne/a268/

Lemley, Mark A. (2011) “The Myth of the Sole Inventor”. Stanford Public Law Working Paper No. 1856610.

Régibeau, P. and K. Rocket (2004) “The Relationship between Intellectual Property Law and Competition Law: An Economic Approach”, University of Essex, Working Paper, 581.

The existence of patent races has spurred many economic models trying to explain how the market structure affects the amount of R&D spent. As patent race models are necessarily dynamic models and thus include several decision- making stages, they can be quite complex and small changes in assumptions may lead to even contradicting results( see for example Loury(1979) and Lee/ Wilde(1980) and their results regarding the Schumpeter hypothesis).
Inherent to these models is the assumption that races for an innovation and a patent on it will exist in different industries, however they are not trying to explain under what circumstances races for patents will exist or if they are actually advantageous from a social perspective.
The ambiguous effects of patent races can be best illustrated by the patent races for XPrizes (see http://www.xprize.org), whereby philanthropists or firms organize races for innovations. By strictly limiting the time of the races and providing a high prize for the winner (between 1 and 20 Million $), firms are incentivized to invest in areas which they would otherwise not have prioritized. This can accelerate and spur innovation, but will at the time redirect funds from projects where they could be spent more efficiently. Furthermore there might be wasteful duplication of R&D spending (compared to the case of Research Joint Ventures). The competing firms for a 10 million $US Xprize thus spent more than 29 million on R&D (see http://www.xprize.org )
Patent races are prominent in medical research. A real world example is the race of the two firms Edwards Lifesciences and Medtronic for a replacement valve which could substitute open-heart surgery. The “prize” for being the first firm to successfully file a patent could expect a market for the product which is worth up to $1, 5 billion. Operations with these replacement valves have already been successfully carried out in various European countries but had previously not been approved by the US American authorities, which makes this real life example very vivid as a huge part of the research has already been carried out. From the same starting point(the research of their European counterparts), the race of the two firm to get the use of these replacement valves approved can be observed nicely.

(http://www.nytimes.com/2009/10/01/business/01valve.html?_r=0 )

https://www.innovationpolicyplatform.org/content/patent-races

One of the most important innovations this past couple years is 3D printing. This innovation is changing the way we live and work and has an enormous impact on the production chain of every industry. The applications of this technology are numerous and very diversified: from daily life accessories to medical equipment or even in the aerospace industry. But this technology goes even further, as recent applications in the medical sector, such as the creation of artificial organs, pushes forward the use of this innovation at an incredibly high level. That is why it gains such interest from firms, and that a real patent race is going on.

“The patents analysis shows that American players are central to innovation on the technologies of 3D printing. Between 1993 and 2011, they represent over 70% of patents. US companies indeed are the leader with two great actors, Stratasys and 3D Systems.” Both firms are trying to patent their improvements faster than their competitors, which lead to an extremely high number of granted patents. This raises the following question: By giving patents even on minor discoveries, aren’t we only focusing on economic profitability? What about the other aspects of creation?

Elon Musk, CEO of Tesla Motors is a proponent of this vision: “If a company is truly relying on patents it means they aren’t innovating, or not innovating fast enough… Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers” Giving the opportunity to use other people’s findings is in the alignment with a much broader vision. Instead of killing innovation by an excess of patents, being open-minded and sharing knowledge is way more interesting for social well-being. It may be time for firms to change their way of thinking and to transform patent races into welfare races.

Moreover, we should think about shorter lifetime patents. This could discourage unnecessary patent filings and allow other companies to innovate based on the detailed patent accounts only several years after filing, but still giving the patent filer an advantage of having a certain monopoly on his findings – he did, after all, work hard to have it.

Sources

http://www.industrie-techno.com/l-impression-3d-vue-au-prisme-des-depots-de-brevets.36223
http://www.wsj.com/articles/tesla-motors-says-it-will-allow-others-to-use-its-patents-1402594375
http://www.usatoday.com/story/money/cars/2014/06/12/tesla-patents-drop/10374433/

I believe that the pros and cons of a patent race largely depend upon the type of industry in question and also whether we are looking at the problem from the viewpoint of the competitors or the industry as a whole.

Addressing the first part, I would take the examples of the utilitarian industries – say fashion industry(loosely apparels). This is an industry which has some trademark protection but hardly any patent protection. In the U.S(its biggest market), there is no law to file for a patent for a particular design. A similar case exists in Japan(3rd biggest market) where for filing patents , you need to prove the absolute uniqueness of the design which is very difficult. In the E.U, however, the patent laws are so fragile that any new design can be patented( a Gucci gown could be made an inch longer and a patent may be obtained) – leading to no one bothering too much about patents and the related lawsuits.

However, this lack of a patent environment hasnt really hampered innovation in this industry. 1. You find new designers ripping off the designs of the old established designers, making subtle changes and starting new lines. Its almost like building on the foundations laid by others.
2. There are folks involved in the counterfeit products business where original Pradas, Nikes’ design are ripped off and cheap versions are made. This however, doesnt deter the original producers, as the customer segments for both the counterfeit and the original are very different.
3. Also, this lack of protection spurs the innovators to innovate in a manner that cannot be easily and economically replicated- be it with the technical acumen required(Stuart Weitzman’s metallic flat wedge sandals) or with the aesthetics involved.

Thus, fashion as an industry hardly faces an issue despite relying heavily upon creativity and extremely short innovation cycles.

So we face this question- Is patent race the biggest motivator behind innovation. Such a situation exists not just in fashion but also in food(its another thing that KFC doesnt reveal its secret recipe but you are free to copy it if you can) and to a certain extent automobiles design. If you look at software, the Open Source Software sees thousands of applications being written on a daily basis.On the other hand, we have the cinema industry (comparatively smaller in revenue size as compared to these utilitarian behemoths) seeing lawsuits being filed day in and out over patent infringement.

In conclusion, I would like to reiterate the fact that Patent race is a sort of innovation by force, whereas I guess, real innovation is inspired by creativity and need. I guess, for some industries, this may not be true(specifically the pharmaceutical sector) where the research involved is time-consuming and involves a lot of resources and hence, the desire to earn money by the winner in the race is understandable. But in this case,let us not forget that we are considering a microscopic view of the industry. Taking a macroscopic view, the industry as a whole suffers whenever there is a zerosum game in action.

As Lennon would say – “Imagine there is no Patents!!!!”

According to the previous post, patent race seems to be an important driver of

the market structure. Before reading this article, patent race was only, in my meaning,

positive because it induces self-surpassing of companies who want to improve

themselves. But the economical aspect wasn’t considered. Indeed, firms engaged in a

patent race have to invest much in R&D. But since the first patented invention lead to a

gain or sustain of a competitive advantage, it is only a waste of money and time for

those who aren’t on the first place. It is quite a controversial dilemma. How should they

manage this problem? Should they continue to invest a lot in order to possibly get

patent, or should they be passive and try to reach a comfortable and stable situation?

As “Thomas Ruelle” says in his commentary, following IBM 6.478 patents have

been delivered in 2012. The term “patent race’ is well chosen and it makes us clearly

understand the size of this phenomenon. Despite I am not so comfortable with this

topic, here is an example of one of the biggest American trade race: Verizon vs AT&T.

Actually Verizon and AT&T are the two leaders in terms of wireless subscribers

in the US. Both had 34% share of all US subscriber meanwhile other majors only own

16%. A real competition lies between these two leaders for the 1st position. Actually,

Verizon is sitting on the top since this company introduced the 4G network faster than

AT&T did.

Moreover, in 2010 when AT&T and Verizon were still not at the top, they acquire

most of low-band wireless spectrum patent. This competitive advantage makes them

able to dominate the market.

In a more personal aspect, invest in R&D can only be benefit for a company even

if it doesn’t get a targeted patent. But can we talk about “wastage”? In my opinion,

although the opportunity of a big competitive advantage is not reached, invest in R&D is

never lost. Indeed, knowledge would have been acquired anyway. There are always

some improvements which could be used for different project. New research ideas

could be found or could lead to new projects. In our current world the research

departments have to be on the center of occupation. We live on a growing world where

developments and improvement are the keys so there always will have positive effects

to R&D. But as I told before, I am not so comfortable with this subject. So it could be

interesting to discuss more about the following question:

-Does the investment in R&D bring some positive aspects or could it be

considered as a total wastage in case of losing a patent race?

Patent race: does the winner really takes it all?

In this comment, I would like to consider the idea that in the patent race, the winner takes it not necessarily all and the arrival of a competitor in the race can even eventually benefit the company by studying the Apple vs Samsung case.

Nowadays, the most known competitors in the patent race are without question Apple and Samsung. It is known that many lawsuits of patents infringements has been filed by both companies.

“Their dispute started in 2011, when Apple first sued Samsung in the U.S. for copying features of the iPhone. Samsung then sued Apple for patent infringement in South Korea, Japan, Australia, the Netherlands, Germany, France, Italy and the U.K. Apple then filed countersuits in five of those countries.” (1)

Indeed, Samsung was first known as as a company that likes to inspire from the others but
eager to lose this reputation, they are now competing in the patent race in order to be seen as the next innovative company. For example, they now lead the patent race on the graphene: a material that could revolution the touchscreen world by making the devices incredibly thin and flexible. Samsung has already acquired 17 patents versus 2 for Apple.

But the most recent race on patent is on Samsungs smartwatches versus Apple’s Iwatch. Indeed, with the approaching saturation on the smartphone market, the smartwatches might be the best technological devices innovation. This race was allegedly won by Samsung which was the first one to introduce the phonewatch while Apple’s Iwatch is scheduled to launch in early 2015.But the Samsung Gear, which was first commercialised in september 2013, performed poorly in terms of commercial sales.

However, analysts say that the coming launching date of Apple’s Iwatch might be the opportunity for Samsung, even if they don’t necessarily know it, for their smartwatch sales to take off.

“One of the factors is that is that Apple’s entry into the smartwatch market “brings credibility, which may work to Samsung’s benefit,” says Jefferson Wang, a wireless and mobility consultant at Philadelphia-based IBB Consulting Group. “Samsung entered a white space, which they had to build up themselves, and it’s a heavy lift to get developers involved and build the ecosystem.”That’s because, in the case of wearable devices, the idea of wearing a computer on one’s wrist is still so novel that — no matter how big a slice of the market Apple takes — Samsung executives believe the market can only grow from here, lifting all boats.” (2)

In conclusion, while the patent races is undoubtedly one of the main challenges faced by innovative company today, in exceptional case such as the one evoked above, we can refute the general idea that “winners takes it all”.

Sources:
(1) http://bgr.com/2014/04/04/2014-apple-samsung-lawsuit/
(2)http://blogs.wsj.com/digits/2014/09/10/for-samsung-apple-smartwatch-could-be-a-blessing-in-disguise/
http://en.wikipedia.org/wiki/Samsung_Galaxy_Gear
http://www.thewearablestuff.com/samsung-smartwatches-round-watchfaces/
http://www.cnet.com/news/apple-patent-application-hints-at-iwatch/
http://www.macrumors.com/2014/05/15/graphene-apple-samsung/
http://www.businessweek.com/articles/2014-05-29/samsung-leads-in-graphene-patent-applications

One of the potential sectors where patent race may have been observed is Commercial Orbital Transportation Services, i.e. companies which provide shuttles for space travel. As the intellectual property in this sector is quite complex and quite rewarding if successful, it provides optimal condition for a patent race. The company which can build and patent a 100% safe spacecraft will have a 100% monopoly over space travel.
However, the scenario is different. Many companies including Elon Musk’s SpaceX have opted for trade secrets instead of patents. This is due to big holes in existing patent laws, especially international patents, which allow countries like China to ” use them as recipe books”

It is indeed complicated to find examples of patent competition and that is because it is not so clear when it does exist between two or more companies, however if for an outside point of view it’s hard to identified competition in patents, for the competitors is more than clear who are their rivals in the market.

Nowadays there is a big patent war in the automobilist field. This event has produced numerous innovations in the electric and hybrids cars whose appear to be the future on this industry. This big wars between car companies has become in a big opportunity for batteries companies such as “Panasonic” or “LG” and although for the oil industries has a negative effect this phenomenon appears to be more reliable for the car companies with the progress of the innovation of the cars. In other words this patent race has been a really good event for the innovation of the automobile industry and its economy, producing at the same time a huge advance for the car engines, just like Rebecca Lawrence, partner and IP expert at law firm Powell Gilbert LLP, say: “The signals very much suggest that the motor industry is set to become more litigious in the near future”, “Historically, periods of rapid innovation…are usually accompanied by fierce battles over the right to use new technologies.” (1)

In this case of the automobile wars we can identify the new niche that is emerging from this races, the electric engines based in batteries are producing also an important develop for the energetic industry and alternative fuels. Here we can realize that the R&D that car companies such as Toyota, Nissan and General Motors, have been invested in this kind of advances more than the appearance or the comfortableness of the cars for example. This fuel innovation, in which car industry has evolved to, has been a huge and greener hit but it was a slow process until the car war became more aggressive. We can observe that in this sector the patent race has resulted with positive results.

Another field that suffers of patents races, also mentioned in the article citied, is the smartphone one, and this aggressive war between cellphone companies has produced a lot of advances in their area, at the same time generating big impulses to the economies of their markets, however it is necessary to remark that this confrontations are also producing a lot of economic waste in patents just for being ahead of other companies, this ferocity may also result in advances stagnation.

(1) http://www.ft.com/cms/s/0/f3875250-40a3-11e3-ae19-00144feabdc0.html#axzz3IluQymNI

An interesting and very recent example of a patent race is the fierce competition among Google, Apple, Samsung and the likes in Curved Glass Display technology. After having reached the pinnacle of progress in smartphone and tablet devices, the wearables like watch, health monitoring devices have become the centre of focus of nearly every technology company in the world. This field directly relates with the requirements of a patent race wherein a large number of firms are working in the same field and direction in the hope of creating and capturing a new market niche of the “Wearables”.

But this also represents an interesting insight, something peculiar to the technology industry and which could also be relevant to many other industries. Patent race doesn’t always lead to zero-sum rewards or negative outcomes for the social welfare. The field is extremely focused in the case of glass display but various firms have come with different variations of the underlying technology and manufacturing processes that will lead to a difference in the price-quality ratio of all the variants (http://www.techtimes.com/articles/1946/20131211/apple-wins-patent-for-curved-glass-display-technology.htm). These variations will help simple health-monitoring devices to be within the reach of the common man and there will also be devices which will remain exclusive to some of the firms and people but will also be very limited in use to the general public.

The patent race in this particular area can then be described as one which achieves social welfare and well as one which achieves the purpose of fostering innovation. The firms competing in the area hope to build a competitive advantage over other players and this seems to be beneficial for one and all.

In this blog post the topic of “patent races” are dealt with. As explained above a patent race takes place when two or several firms pursue the same goal and tries to be the first to be able to file a patent in order to obtain a central position on its market. As pointed out in the above blog post, the literature on patent races is largely theoretical, relies on game theory, and suffers from a lack of empirical analysis. However, there exist examples that resemble patent races. Here I will explain some of these situations.

One of the oldest examples of a patent race is the invention of the telephone. In 1876, Alexander Graham Bell applied for a patent on a device that could transmit speech electrically. His rival, Elisha Gray, applied just two hours later. That Elisha Gray’s design turned out to work better did not matter, Bell had won the patent race and history now remembers him as the official inventor of the telephone.

The industry of the telephone, namely the communications technology industry, is today characterized by several patent races. A famous example is the Samsung – Apple case. Both parties have sued each other for patent infringement and the case is still not settled. During the last three years the two technology giants have filed more than 40 patent lawsuits against each other. Recently, they however agreed to drop all charges against each other in all other countries (more than 9) than the US. In the US court, the Apple Samsung fight continues. One can ask oneself whether the resources and money spent on these lawsuits are really worth it. How about spending these resources on more R&D? A danger with patent wars can be that the involved firms focus more on beating the other firm than on actually innovate and create something of value.

Another industry that has seen several patent races is the chemical industry. An example is the war on patents involving graphene (a pure carbon). British scientists were the first to discover graphene, but its exploitation is shifting more and more towards research communities in Asia and the US. UK struggles to keep up in the race to exploit this new “wonder-material”. According to recent published figures China leads the patent race related to graphene with over 2,204 patents and patent applications. In comparison the UK has published 54 patents. Countries and organisations with high integration levels amongst different scientific and industrial sectors are well placed to exploit the research on graphene as this is a material that can be used in many different sectors, e.g. communication technology, biotech, energy and aviation. Here one can also point to the fact that R&D maybe could be conducted more effectively if research communities across the globe would cooperate and share ideas instead of racing against each other. However, on the other hand, this kind of race can lead to that the progress on the development of graphene is accelerated as the involved scientists work faster than they probably would if they did not face this fierce competition.

Hence it can be concluded that patent races in some cases can help spur innovation and especially the pace of innovations. However, it seems reasonable to argue that if firms were less focused on winning patent wars and more focused on the value they can create with their innovations, this would prove a larger benefit for the societies they operate in. However, as most firms’ prime objective is to maximize profits, making them stop conducting patent wars seems like a tough challenge.

Sources:
https://www.legalzoom.com/articles/inventors-who-lost-the-race-to-the-patent-office

http://www.ibtimes.co.uk/patent-wars-2012-five-key-infringement-lawsuits-416273

http://www.forbes.com/sites/amitchowdhry/2014/08/06/apple-and-samsung-drop-patent-disputes-against-each-other-outside-of-the-u-s/

http://www.techweekeurope.co.uk/workspace/uk-graphene-patent-104257

First of all, despite what we might think, patent races were already occuring in the nineteenth century where two historical examples took place. In my first example, Alexander Graham Bell deposited a patent for his invention (the first telephone) and got it because his horse was faster than the one of his opponent. It was found out later that the invention of his opponent was better but the patent had already been given… This brings my first comment: souldn’t patents be accorded to the best solution found and not to the first which is proposed? As a matter of efficiency, i think it should be given to the first proposed and replaced as soon as a better solution is found. This would give priority to quality over rapidity…
The second old example I found is the invention of the “Levis jeans”. Originally “discovered” by Jacob Davis, it was Levi Strauss who got the patent because Davis signed away the rights to his invention (as he didn’t have enough money to develop it…) before realizing its true value.
These two famous examples show the biggest problem linked with patents: “the inventors with the brightest ideas can somehow end up with nothing…

There are also very recent examples of patent races.

Google giving more importance to quantity over quality:
One of the most successfull companies in the acquisition of patents is Google which got nearly 2000 (their number of patents per year has been significantly increasing over the last years) patents only for the year 2013 (a famous example is the “Google glasses” but there are much more). The goal of Google is to “avoid war and cut the edge for areas it wants to protect”. But Google is facing a problem: “the patents it has acquired have not lived up to their price tag”. As a result, “Google decided to focus more on building a patent portfolio with in-house applications”.

Concerning the patents’ debate about volume versus quality, patents’ experts give importance to quality rather than volume as it is the most important issue in the case of legal defences. But giving priority to quantity can be beneficial to detect any type of attack made by an opponent.

Facebook, focusing on quality
On the other hand, we have companies such as Facebook that “concentrate on quality rather than sheer volume assembling rights in core areas “such as mobile and the internet in general”. The advantage of choosing quality over quantity was showed when it won a “legal battle” against Yahoo in 2012.

Video war

As the article points out, the patent race might create big amounts of wasteful effort on trying to achieve the same goal. An example of this is the format war between Sonys Blue-Ray and Toshibas HD DVD in the middle of the 00’s. This war between these two tech giants goes further beyond the race for only the patents about a product, it also involved the implementation.

The need for a new and better format for screening videos came after the fist HD TV’s came on the market. The two different standards developed by Sony and Toshiba was in response to that. But the story of patent infringement starts before that.

The inventor of the blue lazar ray that the Blu-Ray uses was the Japanese professor Shuji Nakamura. This year he received the Nobel Prize for Physics for his research and findings on blue light-emitting diodes. It was while working for a Japanese company he started to develop his inventions in lighting. He was later paid 180 million dollars from his former employee for the use of his patent.

This leads us back to Sony and Toshiba. They both came up with their own solution to the new demand for higher resolution on videos. The different solutions, Blue-Ray and HD DVD was so different that non of them could claim that their patents excluded the other companies innovation. For that reason the race for allies started.

Sony managed to get several big players in the industry on their team, and after two years Toshiba announced that they would give up the race and the closed all their business related to the HD DVD. Several times there were attempts to avoid this war. Similar conflicts have been avoided before for example the wifi standard, where companies came together to create one standard in stead of fighting against each other.

The result was millions of dollars wasted on technology that could have come to a better use if there had not been a conflict between this big players in the industry. So the example shows that the race towards the same goal can be very expensive and lead to a loot of spoiled resources.

Innovation is undoubtedly a social wealth and should encourage its implementation. However, generation of intellectual property requires a lot of manpower and capital. After publications of Inventions, if there was no patent protection, other competitors would be able to counterfeit in low cost. Therefore, for stimulating innovation, inventers are given excess profits to compensate for their risk taking. That is the reason why patent races appears.

Patent race in the patent system is a veritable “Winner takes all”. Because when a firm announced that it has completed a project and applied for a patent, other companies would have to abandon the ongoing research work on the same project. On this aspect, patent race creates a negative factor of overlapping researches. However, patent race also has a positive aspect. Lending companies in certain circumstances need to take strategic partner ships and alliance. And for laggards, they have to catch up with leading companies and avoid their own disadvantage in technology in the future. Laggards in the process of following the leading companies can use richer cooperative strategy to overcome their disadvantages and play its own unique advantages. We can try to think about that if a laggard just faced strong competitors by itself, it would not be able to win in competitions. This time to seek outside assistance, a joint development strategy would be a choice between laggards. That not only brings companies, existing capital, technology and human resources together, but also achieves even more power than its opponent’s strength in a short team. That would achieve “1+1>2” effect, good economic returns and break opponents’ monopoly.

In my opinion, Pros of patent race are great than cons patent race. Even though it is less efficiency in “Winner take all”. Many companies research on the same project, but just only one can get the patent welfare. But other than that, for survival, companies would cooperate with others. As a consequence, new technology could be invented quickly. There is a good example about Sony Ericsson, which established in 2001, was a tycoon of mobile communications ten years ago. In October 2001, Sony and Ericsson cooperated and established Sony Ericsson. Sony had great technology of electronic device and Ericsson mainly researched mobile. Sony Ericsson created the first mobile phone which had cyber-shot camera. It was a revolutionary product a decade ago. It could be the first ancestor of smartphone. So, patent race stimulates technologies innovation. That is an important thing for improving our life.

Reference:

http://en.wikipedia.org/wiki/Sony_Mobile_Communications

What I particularly like in each of the topics covered, is the lack of common agreement on the solution or measures to take. It seems that it does not exist any pure innovation driver that do not affect in a negative way innovation up to a certain point. Fortunately for us, it makes the argumentation more complex and interesting. Here it is the same. On one hand, a patent race spurs innovation and force innovators to think smarter and faster, but on the other hand it creates a lot of waste since only the first “patenter” gets rewarded, which leads to a gap between innovative effort that company pay and the amount of effort that is socially optimal. In that case we also need to create/design a patent form that balances incentive to innovate/risk of innovating.

The biggest patent war that directly pops in mind is Apple VS Samsung and if we look at IBM with its 6,478 patents obtained in 2012, you have a pretty good idea of how far and fast the race can go, and how much that costs. Nevertheless I am unfortunately not familiar with examples where companies fight for a patent that is supposed to give them access to niche market. Therefore I thought about other questions and examples related to patent race, namely:
• Does the high stake of the race give incentive to company to industrially spy competitors instead of investing in a “no-guarantee game”?
• Is there any situation where companies take part in race for other reasons than capturing market share through competitive advantage?

A problem that is according to me worth to cover is the fact that in a patent race, what matters is not who came up with the innovation but rather who did apply for the patent first. It gives a lot of space for industrial espionage and other related behaviours. Indeed, the pressure induced by the “winner-takes-all” aspect of the race could represent a reason for companies to not poor big money into R&D but instead spy competitors to shortcut all their R&D process and apply first for a patent. By doing so, the risk of a competitor patenting an innovation first decreases in terms of lost investments. The question then becomes; in addition to significant R&D costs and the associated risk of someone else filing first for the patent, does a company should invest additional resources to keep all strategic information in-house and prevent any leakages? On one hand it protects you against industrial espionage but on the other hand, it adds up to the total upfront investment, with no guarantee. Would a company agree to bear increase the potential financial loss?

From my understanding, in most circumstances companies do invest a lot in R&D in order to outperform the market and hedge against competition though patent that represent competitive advantages. It seems quite understandable, if firms want to capture increasing market shares, that they have to invest a lot.

However, we can assume that some companies do not have as corporate strategy to perform better than competitors, either because they do not have sufficient resources to poor into their R&D department or simply because they do not have the ambition to lead the market. In such situations those companies, do not heavily invest in innovation research as their competitors but do invest the minimum needed to follow the market trends and keep on track. And we can assume that those companies patent for smaller innovations that will not change the market structure, but that could allow them to keep active on the market as follower.

We could also imagine a situation where an organisation files for a patent just to reward the inventor’s work. I guess that there is nothing more rewarding for an innovator to have his/her name on a patent. That could be a way for the company to reward its workers who did contribute a lot to the company’s R&D department. It would then build some innovator’s reputation. Then patent would not be considered as a way to shortcut competition but rather as an additional achievement to add to the inventor’s price list. In some narrow specialized field, where the everyone knows each other and the number of specialists is small, I could think about patent races that would be more a war of specialists’ ego than something else.

Technological innovation is a major source of economic growth. R&D is crucial as core capability and competitive advantage for the modern companies in the fierce market competition.The following factors are affected competition advantages in the patent race:
1.Expenditure
(B ranch, 1974)Corporate profits are funding research and development; Of course, the success of research and development will cause an increase in corporate profits.The probability of obtaining a patent on the invention only depends on current business research and development expenses, Regardless of research and development experience in the past.When the cost affected the successful of patent innovation,Monopolist and new entrants in the research and development on which one is willing to spend more, or which one is more likely to be the first successful innovation,is effected by efficiency and substitution effect. (G. ilbert., Newbery, 1982)Monopolist for an innovative,even if not used, also have an incentive to get it for property rights and won the patent race victories.Even if a product innovation and monopoly products and non-discriminatory(not worth the cost to pay for the introduction of new products), the monopolist will be required to obtain ownership of the product in order to avoid competition. Thus,entrants can prevent competition though wining the patent race.On the other hand, due to the substitution effect, new entrants have an incentive to pay the cost of more innovative in order to obtain a patent. Assumed that new entrants to pay more and they get patent earlier than monopoly, its marginal cost is lower than the monopolist.Then the new entrants will replace the original monopoly, they become the new monopoly.(Grossman,Shapiro, 1987)The research indicates that in multi-stage patent race, Once the impact of these actions are taken into account, Leader in the typical approach is to strengthen research and development spending, then,Followers will flinch. However, if the followers in the first stage to keep the leader, the two companies would strengthen efforts to win the second stage victory.
2.experience advantage
(Harris, V. ickers, 1985)The research emphasized the role of patents and other race experience or learning effect.The probability of winning patent race is not only decided on the current research and development expenses, but also decided on past-accumulated experience. At each stage of the game in the patent race, companies decision-making relies on its previous experience.
3.incumbent lead
(Dasgupta ,Stiglitz, 1980)The research showed that incumbent monopolist would have a greater incentive to innovate. Because if new entrants to get the patent, the market will become a duopoly. If the patent obtained by the incumbent, market remains exclusive.Competition between new entrants will reduce time of research, until the value has been offset by the cost of research and development.But the monopolist will be prepared to spend a little more, because the monopoly of the return exceeds the duopoly of income.Thus they monopoly on innovation preemptive and continue to maintain its monopoly position.
4.spillovers
(Dasgupta, 1988) Spillover effect reduces the motivation of enterprises in the patent race to win.
If the spillover effect is large enough, Then the companies will be willing as a follower, to reduce innovation and investment, The result is a Waiting game rather than a race, That is, each enterprise hope that other business innovation.

Different industries, different economic environment, factors affecting the patent race is different, companies can win in the patent race, where its industrial characteristics, their own experience, expenditures, size of the business, whether there are advantages reign.

For example,there are many lawsuits between major mobile handset makers due to the patent problem.Earlier in the year Google accused Microsoft, and others of organising a hostile campaign against its software, “waged through bogus patents”.Microsoft said it now has patent deals with ten companies covering their use of Android.(03/2010)Apple filed a lawsuit with the US International Trade Commission (ITC), said HTC infringed Apple touch-screen interface, internal architecture and other 20 patents, and asked HTC to stop selling infringing products in the United States and advocacy. HTC also to ITC filed a patent infringement case against Apple, alleging that Apple infringed five patents of the company, requested the Commission to stop in the US market iPhone, iPad and other products.

The modern high-tech is not who is the incumbent who had research and development strengths, Mainly depends on funding and spillover effects.In some high-tech industries, innovation and risk,which requires a lot of capital investment, Such as biotechnology, new energy and other industries.At this time the victory depends on the patent race expenditures.
However, in some industries, such as the information industry, software development, patent competition, new entrants or small business may sometimes be better to win than the outcome of a study incumbent.

Factors affecting the patent race is a comprehensive, not one aspect of the factors. Such as morphology, In traditional industries, experience, cost and efficiency factors and the incumbent advantage are the most important factors affecting the patent race. In comparison to the high-tech industry,Traditional industries with investment of resources is characterized,who has an advantage in terms of cost and efficiency of resource inputs, will will have an advantage in the patent race. Traditional industries in business efficiency generally through a learning curve,
Usually, companies which enter the market early or the incumbent, the learning curve is more obvious.And the incumbent also set barriers to entry, the opponent at a disadvantage in the patent race.Therefore, the incumbent has the leadership advantage.

link:
http://www.bbc.co.uk/news/technology-15427575
http://www.bbc.co.uk/news/business-15343549