Forget competition — new research says that sharing patents with competitors will be the real factor that drives future innovation. That’s the finding of Gilad Sorek, an assistant visiting professor of economics at the University at Buffalo, who found that free licensing, or giving up patent protection, stimulates demand for products and in the process make them more valuable.
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"This research arose from the notion that a too-tight patent protection actually may hinder technological progress, reflected in sovereign acts taken by firms who give it up," Sorek said. "In the scenarios I study, further innovation happens [through free-licensing] because a firm needs more research-and-development efforts to be taken by other innovators to stimulate the development of complementary technologies, or in order to encourage consumers stepping into a new market."
The new innovation benefits both customers and companies because even though the inventor is giving up a share of the market for their product, future innovations by others have the potential to improve the products. This, in turn, can make them more valuable.
"Independent research lines are crucial," said Sorek. "If two firms collaborate, pursuing the same experiment, those firms either succeed or fail together. Innovation doesn’t just make innovators better off; it makes current consumers better off and it provides the nexus to the next technological breakthrough."
Sorek highlights Adobe, which put Postscript and PDF in the public domain, and IBM, which donated patents to competitors, as examples of companies that shared patents while also enjoying continued success. Sorek's research is set to be published in an upcoming issue of Economic Letters.
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