Implicit patent alliance acquiring the appropriability of innovation: A case study on inkjet printer companies

This paper proposes a new innovation management scheme called “implicit patent alliance,” and discusses its effectiveness and the conditions required to enact such a scheme with case study of inkjet printers. “Implicit patent alliance” is a patent management scheme in order to create appropriability of innovation. In many markets except a few such as medicine and chemicals, essential patents may not help patentees to dominate the market, because products consist of many essential patents distributed among companies. This situation gives opportunity for many companies to enter the market, and makes the existing patent system ineffective in the process of innovation appropriability. If few companies have essential patents and they cross-license only among them and do not license to their competitors that have no essential patent, a collection of these cross-licenses would work as a virtual alliance which can occupy essential patents. We call this virtual alliance “implicit patent alliance”. Implicit patent alliance is capable to create appropriability of innovation thanks to occupying essential patents even in the markets such as electronics and machinery where one product consists of many patents. In the ink-jet printer market, three patentees of essential patents, Canon, EPSON and Hewlett-Packard, have been in the relation of cross-license only among them. They did not license to outside alliance and dominated the market.