Patents prevent copying, legal suits, enhance the reputation and so forth. Patents vary across various industries due to a host of sector-specific variables. For example, patents are likely to be applied in the industries where the research and development (R&D) cost are high, but imitation is cheap. Other industries are where the information is disclosed by the patent and does not provide competitors with new innovative opportunities.
Effectiveness of patents is linked to the characteristics of the industry such as the R&D process and the nature of the market. Effectiveness of patents varies from the opportunity for innovation, ways in which profits are extracted from innovation to the nature of the knowledge base.
Patents are more effective for radical product innovations than for the incremental process innovations. Patents may contribute more to the economic growth in the process industries than they contribute in product industries because the latter can earn more returns on innovation through sales of complementary products and services, lead times, etc.
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In some industries, obtaining patents is difficult because of the demonstrating the novelty of an invention. Furthermore, use of patents in some industries can lead to the disclosing too much information to competitors.
Another difference is in the industries where the number of patents per innovation is high; it is unlikely that one company holds all necessary rights. Because of lack of all necessary rights, each company uses its patent to bargain for their competitor’s technology.
According to Levin et al. (1987), some industries do not use patents to protect the competitive advantage of their innovations, especially for process innovations. Patents are more effective in certain industries such as chemicals and biotechnologies.
In conclusion, Mandeville, T. D. (1996) suggests that relationships defining the efficiency of patent protection are often non-linear. Thus, understanding how and why patents are used in heterogeneous ways in different industries turns out the more difficult issue. The effectiveness of patents has changed in the last few decades due to the change in the use of patents.