Patent Transactions and Markets for Patents Dealing with Uncertainty Proefschrift ISBN 978-90-3935-804-7 Copyright © 2012, Irene Troy Printed by: ZuidamUithof Drukkerijen, Utrecht Self-published by: Irene Troy, Utrecht No parts of this publication may be reproduced, stored in or introduced into any retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the author. Patent Transactions and Markets for Patents Dealing with Uncertainty Patent transacties en markten voor patenten Omgaan met onzekerheid (met een samenvatting in het Nederlands) Proefschrift ter verkrijging van de graad van doctor aan de Universiteit Utrecht op gezag van de rector magnificus, prof. dr. G. J. van der Zwaan, ingevolge het besluit van het college voor promoties in het openbaar te verdedigen op vrijdag 6 juli 2012 des middags te 12.45 uur door Irene Troy geboren op 25 augustus 1979 te Bregenz, Oostenrijk Promotor: Prof. dr. M. P. Hekkert Co-Promotoren: Dr. A. Peine Dr. A. M. Herrmann This thesis was accomplished with financial support from the Max Planck Institute for the Study of Societies, Cologne, Germany. Contents 1 Introduction ................................................................................................ 1 1.1 Evidence for regional markets for patents and the lack data on patent transactions........................................................................................................... 7 1.2 Determinants of the trade in patents ................................................................... 10 1.3 Conceptualization: Uncertainty and markets ...................................................... 17 1.4 Aims and case background ................................................................................. 24 1.5 Outline of the argument and structure of the thesis ............................................ 28 1.6 Concluding remarks on focus and demarcation of the thesis.............................. 30 2 The patent as tradable good .................................................................... 33 2.1 Introduction ........................................................................................................ 33 2.2 Two sides of a coin: Patents as legal constructs and characteristics of technological knowledge .................................................................................... 35 2.3 Propertization and exclusion as first precondition for a market ......................... 43 2.4 Transfer and appropriation of technological knowledge as second precondition for a market ........................................................................................................ 48 2.5 Are arm’s length transactions of patents possible? ............................................. 51 2.6 Patent licensing of drugs as example .................................................................. 53 2.6.1 Propertization: Patents on drugs ................................................................. 53 2.6.2 Transfer and appropriation: Patent licensing along the clinical pipeline .... 56 2.6.3 Universities and companies heading to the ‘market’? ................................ 59 2.7 Conclusion ......................................................................................................... 63 3 A theoretical framework for analyzing patent transactions ................. 65 3.1 Introduction ........................................................................................................ 65 3.2 Perspectives on uncertainty ................................................................................ 67 3.2.1 Perspectives on uncertainty in the philosophy of economics...................... 67 3.2.2 John Dewey’s theory of inquiry ................................................................. 71 3.2.3 Lucien Karpik’s concept of judgment devices ........................................... 73 3.3 Capturing the concept of uncertainty ................................................................. 76 3.3.1 Facets of uncertainty in patent transactions ................................................ 76 3.3.2 Uncertainties in the innovation and patenting process: The example of drug discovery .................................................................................................... 78 3.3.3 Uncertainties in markets for patents: Valuation and cooperation problems 84 3.3.4 Interaction of uncertainties ......................................................................... 89 3.4 A pragmatist-cultural framework for analyzing patent transactions ................... 90 3.4.1 Connecting the concepts of uncertainty, inquiry and judgment devices ..... 91 3.4.2 The transaction process as object of research ............................................. 93 3.4.3 The theoretical framework ......................................................................... 94 3.4.4 Propositions for the investigation of uncertainty in patent transactions ..... 96 3.5 Discussion and reflection ................................................................................... 98 4 Dealing with high fundamental uncertainty: Patent transactions at ...... the late research stage ............................................................................ 101 4.1 Introduction ...................................................................................................... 101 4.2 Background of patent licensing at the late research stage ................................ 103 4.3 Propositions ...................................................................................................... 108 4.4 Methods............................................................................................................ 111 4.5 The patent transaction process at the late research stage .................................. 113 4.6 Valuation and cooperation problems at the late research stage ....................... 121 4.6.1 Valuation-pricing problems in patent transactions at the late research stage ......................................................................................................... 121 4.6.2 Cooperation problems in patent transactions at the late research stage .... 126 4.6.3 Interaction of valuation and cooperation problems .................................. 131 4.6.4 Interpretation of the results ....................................................................... 132 4.7 Discussion ...................................................................................................... 138 5 Dealing with low fundamental uncertainty: Patent transactions at the clinical stage IIa ............................................................................... 143 5.1 Introduction ...................................................................................................... 143 5.2 Background of patent licensing in the clinical stage IIa ................................... 145 5.3 Propositions ...................................................................................................... 152 5.4 Methods............................................................................................................ 155 5.5 Patent transaction process at the clinical stage IIa ............................................ 157 5.6 Valuation and cooperation problems at the clinical stage IIa ........................... 161 5.6.1 Valuation-pricing problems at the clinical stage IIa ................................. 161 5.6.2 Cooperation problems at the clinical stage IIa .......................................... 164 5.6.3 Interaction of valuation and cooperation problems .................................. 166 5.6.4 Interpretation of the results ....................................................................... 168 5.7 Similarities and dissimilarities of transactions at early and late stages ............. 172 5.8 Discussion ........................................................................................................ 180 6 Towards arm’s length transactions and market constitution: Public IP auctions .................................................................................. 183 6.1 Introduction ...................................................................................................... 183 6.2 IP auctions as matching and pricing mechanism .............................................. 185 6.3 Theoretical framework ..................................................................................... 186 6.4 Methods............................................................................................................ 192 6.5 Public IP auction events as special case ........................................................... 198 6.5.1 Ocean Tomo LLC as PMI and host of public IP auctions ........................ 198 6.5.2 Coping with uncertainties in the IP auction process ................................. 202 6.5.3 The Live Multi-Lot IP auction in fall 2008 in Chicago: The marketplace in a forum ..................................................................................................... 207 6.5.4 Market constitution in the Live Multi-Lot IP auction event ..................... 211 6.5.5 Interpretation of the results ....................................................................... 213 6.6 Conclusion ....................................................................................................... 218 7 Patent market intermediaries