On 16 and 17 June 2021, the Mannheim Virtual IO Workshop on secrecy and disclosure in innovation was jointly hosted by ZEW Mannheim, the Mannheim Centre for Competition and Innovation (MaCCI), and the Collaborative Research Center (CRC) TR 224 “EPoS” at the universities of Bonn and Mannheim.

 Screen capture of Dr. Nicola Searle during the lecture
“Trade secrets are the Schrödinger’s cat of IP – they both do and do not exist until they surface in the wake of a legal dispute” said Dr. Nicola Searle, senior lecturer at Goldsmiths, University of London, UK.

Speakers and participants from Europe, North America, and South America gathered virtually to present and discuss their latest theoretical and empirical work on trade secrets, patenting strategies, and disclosure in science.

Secrecy: an elusive form of protection

Stephen Glaeser presented results, which suggest that the quality of information disclosure in patents has an important impact on subsequent innovation.

Secrecy is a commonly used tool in firms’ intellectual property (IP) protection toolkits. It is, however, by nature not an easy subject for research. (Trade) secrets are by definition secret, and data are difficult to come by. In the words of Dr. Nicola Searle, senior lecturer at Goldsmiths, University of London, UK, trade secrets are the Schrödinger’s cat of IP – they both do and do not exist until they surface in the wake of a legal dispute. She presented a systematic study of such court cases to shed new light on firms’ joint use of secrecy and patents in IP management. In further presentations, the authors focused on the usage of secrecy in environments characterised by different levels of misappropriation as well as on the effects of the strength of legal protection of trade secrets. The presented work highlighted some unresolved and open questions that future work will need to address.

Far-reaching implications of legal rule-enforcement

Professor Alexandra Zabys presentation showed how differences in the enforcement of disclosure policies can drive the effect of disclosure quality on follow-on innovation.

A second set of papers looked at the disclosure function of patents. The grand bargain of the patent system is a simple quid pro quo: society grants inventors exclusive rights over their inventions in exchange for full disclosure of technical details in patent documents. This disclosure function is often called into question and its imperfections cited as a manifestation of a supposedly flawed patent system. Recent empirical work has shed new and more nuanced light on the issue. Results presented by Stephen Glaeser, assistant professor for accounting at the University of North Carolina (UNC) at Chapel Hill, USA, suggest that the quality of information disclosure in patents has an important impact on subsequent innovation. He and his colleagues from UNC and Cornell University show that patents assigned to more lenient patent examiners at the patent office – more lenient with respect to the quality of disclosure – lead to significantly less follow-on innovation. Professor Alexandra Zaby from Seeburg Castle University in Austria added to the discussion by showing – using a theoretical model – how differences in the enforcement of disclosure policies can drive the effect of disclosure quality on follow-on innovation. Both contributions highlight the importance of a better understanding of the legal rules and policies that govern patent disclosure.

Not just patents: disclosure of scientific research results

Associate Professor Markus Simeth talked about firms’ incentives to choose scientific publications as a vehicle for disclosure and firms’ access to capital.

Scientific publications are an important source of information, and firms not only disclose their research results in patents, but also publish them in scientific journals. Associate Professor Markus Simeth from Copenhagen Business School, Denmark, presented new results that shed light on firms’ incentives to choose scientific publications as a vehicle for disclosure. He and his co-authors find that disclosure through scientific publications can mitigate problems of asymmetric information in financial markets and improve firms’ access to capital. Their findings have important implications for the welfare effects of transparency initiatives in financial markets – namely, when the impact of such initiatives spills over into technology markets.

Mannheim Virtual IO Seminar Series

The goal of the workshop was to bring together scholars who work at the frontier of an often-neglected area of research and to provide them with a forum for discussion and exchange. The workshop took place as part of the Mannheim Virtual IO Seminar series jointly organised by ZEW, MaCCI, and CRC TR 224, which features current empirical and theoretical research related to the topic of privacy and competition. International scholars present their recent work and discuss it with the participants. 

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