How Companies Choose these Tools

AuthorRémi Lallement
ProfessionCharge of Mission (policy analyst), France Stratégie, France
Pages13-28
2
How Companies Choose these Tools
Taking into consideration the diversity of mechanisms offered to
companies to secure the product of an innovation effort and reap the
rewards, which of them do companies choose? Why do they decide in
favor of one rather than the other? To what extent can they combine
these different tools? To what extent do they think that these tools are
effective?
As for the preferences of companies in relation to the different
ways of protecting innovation, a certain number of general results are
well backed up. They have been first established by two pioneering
empirical studies focused on companies in the manufacturing sector
with R&D activities in the United States. One of them, carried out by
Levin et al. [LEV 87], relies on a survey conducted at Yale University
in 1983. The other, carried out by Cohen et al. [COH 00] is based on a
survey conducted by Carnegie Mellon in 1994. These surveys provide
information about the companies’ propensity to patent their
innovations, that is the percentage of their inventions that they decide
to patent. Both show that in most sectors – with the exception of the
drug industry – the companies in question in general rely less on
patents than other appropriation mechanisms such as trade secrets,
lead time over competitors, or the use of complementary assets. Cohen
et al. [COH 00] point out that even if the importance of patents has
increased to a certain extent between the two studies – at least for
large companies and in certain sectors – it remains less significant
than these informal tools in most sectors.
Intellectual Property and Innovation Protection: New Practices and New Policy Issues,
First Edition. Rémi Lallement.
© ISTE Ltd 2017. Published by ISTE Ltd and John Wiley & Sons, Inc.
14 Intellectual Property and Innovation Protection
This general result is not only valid for the United States. As is
shown in Figure 2.1, it also holds true for the vast majority of
European countries. It also applies to Japan, where companies
generally give the priority to protection through lead time over
competitors and the use of complementary assets in the manufacturing
or sales sector [COH 02].
Similarly, studies focusing on companies in the manufacturing
sector in the United States [COH 00] and France [DUG 98] agree on
the main reasons why companies generally prefer not to file patents:
the ease with which it is possible to “invent around” a patent, the fact
that a patent cannot prevent imitation, the importance of the
information disclosed in a patent application, the difficulty
encountered in demonstrating the novelty of the invention in question,
the fact that it is expensive to obtain and maintain a patent right and,
finally, the fact that it is expensive to defend a patent in court in case
of litigation.
It seems that companies often resort to a variety of mechanisms –
formal or informal – to protect their inventions and that in most
sectors they tend to combine different tools, whether to protect the
same innovation or when an innovation includes aspects or
components that may be protected independently of one another. Let
us consider an example. Trademark law can be used to keep sales
prices relatively high for a product whose patent has already come
into the public domain. This is often the case in the pharmaceutical
industry, even if the chemical composition of the drug in question is
identical to that of a generic product sold at a much lower price. In the
appropriate case, this is due to how the reputation of the originator
drug, thanks to the brand, is more established than that of a competitor
that produces a generic drug [POS 05]. As for informal tools,
similarly, the protection provided by lead time over competitors may,
for example, be reinforced by using trade secrets. A company can also
protect itself against its rivals by both using intellectual property law –
for example, through a registered trademark – and invoking the
argument of unfair competition and parasitism, on the understanding
that the notion of unfair competition is also included in the WTO’s
TRIPS agreements. An innovative company may have to tackle this
issue, for example, when dealing with a cybersquatter appropriating
one of its Internet domain names.

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