Discussion Paper Details

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Title: Innovation Beyond Patents: Technological Complexity as a Protection against Imitation

Author(s): Emeric Henry and Francisco Ruiz-Aliseda

Publication Date: March 2012

Keyword(s): complexity, dynamic games, imitation and innovation

Programme Area(s): Industrial Organization

Abstract: A large portion of innovators do not patent their inventions. This is a relative puzzle since innovators are often perceived to be at the mercy of imitators in the absence of legal protection. In practice, innovators however invest actively in making their products technologically hard to reverse-engineer. We consider the dynamics of imitation and investment in such protection technologies, both by the innovator and by imitators. We show that it can justify high level of profits beyond patents and can account for the differences across sectors in the propensity to patent. Surprisingly, in general, the protection technologies that yield the highest profits for the innovator are expensive and do not protect well. Our model also allows us to draw conclusions on the dynamics of mobility of researchers in innovative industries.

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Bibliographic Reference

Henry, E and Ruiz-Aliseda, F. 2012. 'Innovation Beyond Patents: Technological Complexity as a Protection against Imitation'. London, Centre for Economic Policy Research.