Argument Double externality Green technology policy needs diffusion - PDF document

6/12/2010 Innovation in clean/green technology: Can patent commons help? Bronwyn H. Hall U of Maastricht and UC Berkeley Christian Helmers Oxford University and LSE Argument • Double externality – Green technology policy needs diffusion as well as innovation • Green technology is highly varied, draws from many scientific and engineering disciplines – Much is complex – Some requires standard-setting • Patents raise TC and slow diffusion June 2010 Sciences Po Conference 2 1

6/12/2010 The question • Can a patent commons help? – Many actors, differing motives – Firms – variation over • Desire to profit from clean tech via exchange and collaboration • Avoid some TC associated with patents and knowledge sharing • Modest public interest motives – Society • Lower cost innovation in green tech? • Or is this a large established firm strategy that may hinder new entry? June 2010 Sciences Po Conference 3 The eco-patents commons • Created January 2008 by IBM at World Business Council For Sustainable Development (WBCSD) • First and only green patent commons • Firms can pledge patents related to green technology – 11 firms have done so (triad) • Green defined by a classification listing IPC subclasses – some flexibility • Pledge - available for use by third parties for climate-change related activities with auto royalty-free license; ownership remains with firm – Not a donation, and not tax deductable – Defensive termination right if user enforces another patent against pledging firm June 2010 Sciences Po Conference 4 2

6/12/2010 A puzzle • Why not use defensive publication? – Keeping these patents in force requires paying fees (which the firms apparently do) – Royalty-free license to all comers with no contracting means they don’t even know who uses the technology – Is defensive termination that valuable? June 2010 Sciences Po Conference 5 Some views [I]t is clear that the donating company did not find the patent to have compelling com-petitive advantage for them, or they would not have donated it to begin with, so why would any other company necessarily find value in the donated patent? Nancy Cronin, Greenbizz 2008 Why would a patent owner contribute a patent, continue to sustain the maintenance costs, yet have the patent commonly available to all having under-taken to not enforce the patent? Duncan Bucknell, Think IP Strategy - 2008 June 2010 Sciences Po Conference 6 3

6/12/2010 IBM view [P]ledging patents for free use by others [...] can be a win for innovators in other parts of the world, who might look at these ideas and further them and use them as the basis of additional solutions. And it can be a win for those who pledge because it could open up opportunities to collaborate with people that you might not otherwise have collaborated with. (Wayne Balta, Vice President of Environmental Affairs, IBM) June 2010 Sciences Po Conference 7 Our study • 121 patents (including some equivalents) listed on the Ecopatent Commons website. • Retrieved information on (almost) all of them from Patstat, resulting in 119 unique priority/publn authority combinations. • ~87 unique priorities between 1989 and 2005 June 2010 Sciences Po Conference 8 4

6/12/2010 Age, legal status, and `green character’ of sample patents • Age measured as commons entry date minus priority date – Ranges from 3 to 20 with a median of 9.5 years • All of these patents are in force, except for those held by the largest contributors: – Bosch – 65% – IBM – 86% – Xerox – 75% • 35% green according to OECD definition June 2010 Sciences Po Conference 9 Age distribution June 2010 Sciences Po Conference 10 5

6/12/2010 Average age in years of patent by legal status, as of Sept 1, 2008 Number Mean Median Q1 Q3 In force 88 9.2 9.9 5.2 12.9 Exam request 3 6.3 7.2 3.5 8.2 Withdrawn 6 6.9 6.4 6.3 6.5 Nonpayment of fees 9 9.6 7.4 4.2 14.8 Rejected 2 6.7 6.7 6.0 7.3 Expired 7 18.1 18.4 17.1 18.9 NA 4 14.1 15.3 11.3 16.8 All 119 9.7 9.8 5.8 13.7 June 2010 Sciences Po Conference 11 Controls 1. How do these patents compare to other patents in the firm’s portfolio? – All patents owned by the 12 firms with priority between 1989 and 2005 2. How do these patents compare to other patents in the same class? A matched sample of patents, matched on type – of owner, priority year, IPC4, and priority authority (some problems here) June 2010 Sciences Po Conference 12 6

6/12/2010 Firm motivations • For donations to an eco-patent commons – Public relations motives • Bad – inventions are obsolete and worthless, little cost • Good – recognize some benefit in an open innovation environment; form agreement with competitors – Sell complementary goods & services • Variation – facilitate sponsored standards adoption June 2010 Sciences Po Conference 13 1. Firm decision We cannot observe the first two decisions. We look at pledge conditional on patenting and not working. Not worked: less valuable, or far from firm’s competency Pledged: far from firm’s competency, does not threaten firm, is relevant for clean tech June 2010 Sciences Po Conference 14 7

6/12/2010 Share of portfolio is very small Eco- Total patents patents Share Bosch 23 8,817 0.261% Dow 2 6,490 0.031% DuPont 9 13,147 0.068% FujiXerox 2 2,460 0.081% IBM 28 9,934 0.282% Mannesmann 1 730 0.137% Nokia 1 3,478 0.029% PitneyBowes 2 424 0.472% Ricoh 1 10,414 0.010% Sony 4 12,450 0.032% Taisei 2 170 1.176% Xerox 12 9,767 0.123% Total 87 78,281 0.111% 1989-2005 priority dates, corrected for equivalents (unique priorities) June 2010 Sciences Po Conference 15 Not the least valuable in the portfolio Probability a patent from the firm’s portfolio is pledged (mean = 0.041%) Variable Marginal T-statistic Marginal T-statistic probability probability Log family size 0.00014% 2.87 0.00003% 3.32 Log forward cites 0.00023% 3.69 0.00004% 3.51 Log backward cites 0.00009% 5.48 0.00002% 5.42 Log NPL cites -0.00002% -0.66 -0.000003% -0.55 Log number of IPCs -0.00006% -2.58 -0.00001% -3.67 D (similar IPC) -0.00054% -1.89 -0.00006% -1.45 D (OECD green tech) 0.00541% 7.22 Pseudo R-squared 0.621 0.670 Standard errors robust and clustered on firm. Priority year (17), 1 digit IPC (6), and firm dummies (5) included. Sample size is 292,698 with 119 eco patents. June 2010 Sciences Po Conference 16 8

6/12/2010 Equivalents removed Probability a patent from the firm’s portfolio is donated (mean = 0.169%) Variable Marginal T-statistic Marginal T-statistic probability probability Log family size 0.00051% 2.60 0.00019% 2.72 Log forward cites 0.00292% 4.87 0.00098% 4.91 Log backward cites 0.00068% 4.62 0.00023% 5.41 Log NPL cites 0.00025% 0.83 0.00007% 0.74 Log number of IPCs -0.00066% -5.29 -0.00023% -5.61 D (similar IPC) -0.00449% -2.57 -0.00101% -2.09 D (OECD green tech) 0.05449% 7.06 Pseudo R-squared 0.648 0.706 Standard errors robust and clustered on firm. Priority year (17), 1 digit IPC (6), and firm dummies (5) included. Sample size is 50,308 with 85 eco patents. June 2010 Sciences Po Conference 17 Conclusions • Green patents by OECD definition are indeed more likely to be pledged • Pledged patents are more valuable than the typical patent in a firm’s portfolio, controlling for priority year and 1-digit IPC • They are slightly less likely to match the IPC pattern of the firm, suggesting that they are not central to firm strategy June 2010 Sciences Po Conference 18 9

6/12/2010 2. Compare other pats in class � Control sample matched on priority year, 1- digit IPC, priority authority, and type of owner (firm) � Yields around 24,000 patents � Chose 119 of these patents using probabilities generated by EcoPC patents � same application authority as sample patents June 2010 Sciences Po Conference 19 EcoPC patents are more highly cited than others in the class Citations are taken from espace as of May 2010. Controls have the same priority date as the sample, so no adjustment for truncation has been performed. Median, mean for eco-patents = 4, 8.8; for controls = 3, 5.2 June 2010 Sciences Po Conference 20 10

6/12/2010 EcoPC patents cover fewer technology areas Matched Control Sample EcoPC Patents 0 4 0 3 requency 0 2 F 0 1 0 0 10 20 30 40 0 10 20 30 40 Number of IPCs Median, mean for eco-patents = 3, 4.6; for controls = 5, 5.9 June 2010 Sciences Po Conference 21 EcoPC patents take longer to issue than other patents in the class Duration Priority-Publication EcoPC Patents Matched Control Sample 80 80 60 60 Frequency Frequency 40 40 20 20 0 0 0 5 10 15 0 5 10 15 Time between Priority and Publication Dates Time between Priority and Publication Dates June 2010 Sciences Po Conference 22 11

6/12/2010 Conclusions • Pledged patents – are more valuable (2 EcoPC patents with >30 forward citations) or more highly used – are technologically narrower – take longer to issue than similar patent in same IPC classes June 2010 Sciences Po Conference 23 Summary • EcoPC firms appear to be doing what they claim to be doing: – pledging valuable green patents • But: – 20% of EcoPC patents have expired – Some are not yet granted – Some issues with setup – 12 patent numbers wrong on website June 2010 Sciences Po Conference 24 12