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Corporate Open Disclosure: A Defensive Perspective

Final Report Summary - OPEN (Corporate Open Disclosure: A Defensive Perspective)

Firms publish research results without attaching any property right to them (open disclosure henceforth). Companies like IBM, Philips, NEC, Siemens among others have published and openly distributed corporate journals at their own expenses (IBM initiated this trend in 1958). Scientists working for IBM and AT&T have published separately twice as many scientific articles as MIT and Stanford between 1991 and 2001 in the scientific field of “Computer Science”. This evidence contradicts the standard interpretations provided by economic theories, which advocate the use of the patent system in order to limit other inventors from accessing the knowledge.

In this project we provide systematic empirical evidence on the use of open disclosure with a focus on strategic uses of the latter. The strategic use of corporate open disclosure means that companies disclose technical knowledge without attaching any exclusionary right to it (like in the case of patents) to affect competitors' strategies such as preventing from obtaining patents on the same knowledge or shaping their future technologies. The questions we are interested in this proposal are a) how companies use open disclosure strategically and b) how this use affects corporate performance.

The project first studies the role that different types of publications (corporate bulletins, scientific articles, conference proceedings, trade journals, etc) play in the assessment of patentability criteria. Patents, and novelty of the inventions, are assessed against the existing prior art. Publications have different characteristics in terms of control on content and timing of the publication as well as relevance and legitimation of the content therein which can have heterogeneous effects on the evaluation of patent applications. Using a database of randomly extracted 4651 patent applications at EPO between 1991 and 2001, we isolated the non-patent cited prior art and categorized according to their typology and linked them to their implications for patentability. The analysis has shown that scientific articles are more likely to deliver contents which overlaps sensibly with the one in patent applications than other forms of disclosure such as bulletins, books and proceedings. Corporate bulletins, the most strategic form of open disclosure used by firms, instead are largely used in patents with narrow scope in Electronics, suggesting that bulletins actually protect minor inventions which the firm does not consider worth protecting through patents.

The project then empirically explores the implications of open disclosure for the ability of companies to appropriate value from their innovative investments. We investigate the impact of corporate disclosure in scientific outlets, the diffusion of the disclosure in the patent system and the re-appropriation thereof on the market value of semiconductor firms. We link non-patent literature in patent applications to scientific articles of the firms under analysis for the period 1994 and 2007 and find that disclosure in scientific journals has a negative impact on market valuation, partly offset by the diffusion in future patents. We do not find effects associated to re-absorption. Splitting by time and firm size, we find that the effects are more pronounced in the last part of the period and for firms with small patent portfolios, for which re-absorption is associated to a premium. These findings speak in favor of strategic considerations of open disclosure, where markets discount the loss of control on disclosed knowledge, yet increasingly prize the immediate effects on future technological developments.

While further more detailed research is needed and planned, these results strongly indicate that open disclosure can be an effective and cheap strategy to shape the content of future patent applications by competitors.