Competing on Standards? Entrepreneurship, Intellectual Property and Platform Technologies

Entrepreneurs often rely on intellectual property (IP) to earn a return on their innovations, and also compatibility standards, which allow them to supply specialized components for a shared technology platform. This paper compares the IP strategies of small entrepreneurs and large incumbents that disclose patents at thirteen voluntary Standard Setting Organizations (SSOs). These patents have a relatively high litigation rate. For small private firms, the probability of filing a lawsuit increases after disclosure to the SSO. For large public firms, the filing rate is unchanged. While forward citations increase after disclosure for all firms, the size of this effect is the same for entrepreneurs and incumbents. These results suggest that standards increase the difference between large and small firms’ incentives to litigate, rather than the relative value of their patents. We conclude that because specialized technology providers cannot seek rents in complementary markets, they defend IP more aggressively once it has been incorporated into an open platform