Hegde Mowery Graham (2009) - Pioneering Inventors Or Thicket Builders

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Reference

  • Hegde, D., Mowery, D.C. and Graham, S.J.H. (2009), "Pioneering Inventors or Thicket Builders: Which US Firms Use Continuations in Patenting?", Management Science, Vol.55, No.7, pp.1214--1226
@article{hegde2009pioneering,
  title={Pioneering Inventors or Thicket Builders: Which US Firms Use Continuations in Patenting?},
  author={Hegde, D. and Mowery, D.C. and Graham, S.J.H.},
  journal={Management Science},
  volume={55},
  number={7},
  pages={1214--1226},
  year={2009},
  abstract={Why do firms use continuations in the prosecution of their patents? Motivated by the widespread use of continuations by U.S. firms and the prominence of this procedure in U.S. patent policy debates, we investigate the influence of corporate and patent characteristics on the use of continuations. We employ novel data on applicants and their filings of three types of continuations—the continuation application (CAP), the continuations in part (CIP), and divisions—during 1981–2000 to distinguish among the motives for continuing patents. We find that CIPs are disproportionately filed by research and development-intensive firms that patent heavily, and that these continuations are more common in chemical and biological technologies. Patents issuing from CIPs cover relatively important inventions and their use appears consistent with a strategy of protecting “pioneering inventions.” In contrast, CAPs and divisions are associated with less important patents assigned to capital-intensive firms, particularly in computer and semiconductor fields, and appear to be used in defensive patenting strategies. We analyze the effects of the 1995 change in patent term, and find that the act reduced continuations overall and shifted the output of continuations toward less important patents.},
  discipline={Econ},
  research_type={Empirical},
  industry={},
  thicket_stance={},
  thicket_stance_extract={},
  thicket_def={},
  thicket_def_extract={},  
  tags={},
  filename={Hegde Mowery Graham (2009) - Pioneering Inventors Or Thicket Builders.pdf}
}

File(s)

Abstract

Why do firms use continuations in the prosecution of their patents? Motivated by the widespread use of continuations by U.S. firms and the prominence of this procedure in U.S. patent policy debates, we investigate the influence of corporate and patent characteristics on the use of continuations. We employ novel data on applicants and their filings of three types of continuations—the continuation application (CAP), the continuations in part (CIP), and divisions—during 1981–2000 to distinguish among the motives for continuing patents. We find that CIPs are disproportionately filed by research and development-intensive firms that patent heavily, and that these continuations are more common in chemical and biological technologies. Patents issuing from CIPs cover relatively important inventions and their use appears consistent with a strategy of protecting “pioneering inventions.” In contrast, CAPs and divisions are associated with less important patents assigned to capital-intensive firms, particularly in computer and semiconductor fields, and appear to be used in defensive patenting strategies. We analyze the effects of the 1995 change in patent term, and find that the act reduced continuations overall and shifted the output of continuations toward less important patents.

Review

Measures of thicket

The article considers reasons firms engage in continuation patenting:

  • A positive relationship between Continuation Applications (CAPs) and an interaction of patent intensity and capital intensity variables is interpreted as indicative of 'defensive patenting' that would occur in a patent thicket.
  • Continuations in part applications (CIPs) are interpreted as being used by inventors to insertadditional material into pending application and therefore not driven by patent thicket conditions.

Sample

  • 363-308 utility patents granted to U.S. businesses by the USPTO with filing dates between 1981-2000, issued in 1981-2004.
    • Patent applications include Continuations and non-continuations;
  • Data on 1,273 firms matching to the above patents was obtained from NBER's USPTO-Compustat correspondence file.

Results

  • CAPs account for 50% of continuations in computers and communications.
"[T]he 'continuation application' (CAP) and the 'division' (the following sections discuss the different types of continuations in greater detail), are associated with less valuable patents and used more intensively by capital-intensive firms that patent intensively. This pattern is particularly strong in electronics and computer patents after the 1995 change in patent term, and we suggest that CAPs and divisions are an important part of firms’ defensive patenting strategies in these and similar industries."
  • Continuations (CAPs and CIPs) account for 44% of patents in "drugs and medicine" and 34% of those in "chemicals", but CIPs account for about 30% of both technology areas.
"[T]he 'continuation in part' (CIP) appears to be filed disproportionately by R&D-intensive firms that patent heavily and is more common in chemical and biological technologies. Firms also employ CIPs to cover technologically valuable inventions, and the use of CIPs appears to be consistent with a strategy of protecting “pioneering inventions."
  • The variable reflecting likely patent thicket strategies, the interaction between patent intensity and capital intensity, is significantly positively related to CAPs but negatively related to CIPs.
  • Patent importance (forward citations) is positively related to CIPs, while CAPs and Divisions are not.
  • Firm size is positively related to CAPs and Divisions, but negatively to CIPs.
"These results are broadly consistent with the view that CIPs are more likely to be used by smaller “pioneering inventors,” in contrast to CAPs and divisions, which are more likely to be used by large corporate patentees in obtaining patents of lower importance."

Social Welfare Consequences

"These results suggest that post-1995 CAPs and divisions are more likely than pre-1995 CAPs and divisions to be used for inventions of lower technological importance, and they are used more intensively after June 1995 by firms with characteristics associated with users of defensive patenting strategies...the coefficient for the variable that we view as most clearly associated with the “pioneering inventor,” [interaction of R&D and patenting intensity], loses its statistical significance. The corporate characteristics that we identify with “defensive patentees,” interaction of capital and patenting intensity] however, retain a negative and significant coefficient in predicting the choice of CIPs for the post-June 1995 period."
"...characteristics of CIP patents and assignees are broadly consistent with the claims by some interest groups that the continuation supports the inventive efforts of “pioneering inventors."
"Our results do not support a definite characterization of the CIP as prone to abuse before or after 1995, but they do suggest that skepticism concerning the benefits of the CAP is warranted."

Dependent Variable and Model

  • Dependent variables are:
    • Firm's decision to file (CAP) Continuation Application;
    • Firm's decision to file (CIP) Continuation in Part;
    • Firm's decision to file Division of a patent applicaton.
  • A multinomial logit model is estimated that accounts for:
    • Patent intensity (number of issued patents in year per R&D dollar);
    • R&D intensity per employee;
    • Capital intensity (book value of plant, property and equipment per employee);
    • Interactions of capital and patent intensity;
    • Interactions of R&D and patent intensity;
    • Technological importance of patent (number of forward citations obtained in four years from issue of the patent);
    • Centrality of patent to firm (share of firm's patents in a given technology class);
    • Firm's time in a technology class (the time between application year and the first patent in a technology class);
    • Indicators for 36 technology class (2-digit SIC) and years;
    • Firm size (log of employment);
    • Firm age.