Preemptive patenting, secondary patents, and the persistence of monopoly

Abstract

We develop a theoretical economic model that establishes the link between fragmented patenting systems in an industry already characterized as a monopoly resulting in continuous/steady monopolistic market structure. We demonstrated that preemptive patenting strategy, by using secondary patenting scheme, may lead to an increase in the number of patents without changing actual number of products on the market. Moreover, when such a strategy is employed by a monopoly, it only serves to sustain and further monopolistic and therefore socially suboptimal market structure. Institutional/legal framework must exist to promote this kind of socially suboptimal behavior and resulting outcomes.