Patent strategies for ensuring the appropriability of innovation: Case studies of inkjet printers and DVD drives

In most markets, essential patents may not help patentees to dominate the market because a single product involves many essential patents, which are distributed among many companies; this allows many companies to enter the market. In the inkjet printer and DVD drive markets, however, essential patent holders have succeeded in dominating the market. This paper describes the patent strategies that inkjet printer companies and DVD drive companies have used to ensure the appropriability of innovation. Canon, Epson, and Hewlett-Packard licensed their essential patents only among themselves and did not license these patents to other companies. This strategy allowed these companies to monopolise the licenses of the essential patents and to dominate the market. The five subsidiaries of the six main DVD standard essential patent holders succeeded in avoiding the payment of expensive patent royalty, which served as a barrier against their competitors. This strategy allowed them to dominate the DVD drive market successfully.