ABSTRACT
We develop a sequential model to examine patent litigation, acquisition, and commercialization decisions in innovative industries. The model focuses on potential intellectual property disputes among two patent-holding firms with overlapping technologies and a non-patent-owning producer. We highlight the role of the belief gap, defined as the difference between the patent owner’s and other market participants’ assessments of a sleeping patent’s win rate in potential litigation, in shaping these strategic decisions. Alongside the belief gap, two other factors are also important: the relative strength of the commercialized patent compared with the sleeping patent, and the degree of technological overlap between them. These factors jointly determine whether firms commercialize, retain, or sell a patent, as well as the identity of the acquirer. Our analysis shows that (1) low belief gaps facilitate settlement, whereas high gaps trigger litigation for uncommercialized sleeping patents; (2) higher relative win rate of the commercialized patent promotes post-acquisition settlement; (3) high belief gaps combined with low technological overlap induce patent holders to acquire sleeping patents; and (4) high technological overlap reduces patent commercialization. This framework advances the understanding of patent deployment strategies under market dynamics and offers policy insights for effective patent management.
Liu, Du and Lin, Danmo, Commercialise or Sleep? Capturing Value from Patenting (October 20, 2025).
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