Are Trade Marks and Patents Complementary or Substitute Protections for Innovation.

The benefits of innovations for firms strongly depend on their ability to develop complementary appropriability means, including intellectual property (IP) rights. This paper aims at assessing the interrelated effects of two types of IP rights, namely patents and trade marks, considering them in their core function as legal protection devices. Based on a supermodularity analysis, we show that the complementary relationship between trade marks and patents is not straightforward. Depending on the levels of advertising spillovers and depreciation rate, trade marks are found to be either complementary or substitute to patents. Based on a data set encompassing the IP activity of a sample of French publicly traded firms, we find that patents and trade marks are complementary in chemical and pharmaceutical sectors, but substitute in high-tech business sectors (computer products and electrical equipment).