Publication: Knowledge disclosure as intellectual property rights
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2007-10
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Abstract
We study a model in which an inventor discloses knowledge about its innovation and
then a rival chooses the probability of attaining a competing invention. Disclosures, by
creating prior art, diminish the probability that the rival has of receiving a patent for its
invention (legal externality), but, by revealing knowledge, they decrease the marginal
cost of R&D (knowledge externality). We stress the following result. If the knowledge
externality is large compared to the legal externality, decreasing the patentability
standards leads to fewer disclosures and may hinder R&D. We also determine the
impact of changes in market payoffs on the equilibrium level of disclosures and R&D.
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Disclosure, Patentability standard, Independent invention, Transfer effect, Threat effect