Intellectual Property Strategy in the Global Cosmetics Industry

In this paper we analyze aspects of the intellectual property strategies of firms in the global cosmetics and toilet preparations industry. Using detailed data on all 4,205 EPO patent grants in the relevant IPC class between 1980 and 2001, we find that about 15 percent of all patents are challenged in EPO opposition proceedings, a rate about twice as high as in the overall population of EPO patents. Moreover, opposition in this sector is more frequent than in chemicals-based high technology industries such as biotechnology and pharmaceuticals. About one third of the opposition cases involve multiple opponents. We search for rationales that could explain this surprisingly strong “IP litigation” activity. In a first step, we use simple probability models to analyze the likelihood of opposition as a function of characteristics of the attacked patent. We then introduce owner firm variables and find that major differences across firms in the likelihood of having their patents opposed prevail even after accounting for other influences. Aggressive opposition in the past appears to be associated with a reduction of attacks on own patents. In future work we will look at the determinants of outcomes and duration of these oppositions, in an attempt to understand the firms’ strategies more fully. Acknowledgements This version of the paper was prepared for presentation at the Productivity Program meetingsof the NBER Summer Institute. An earlier version of the paper was presented in February 2002 at the University of Maastricht Workshop on Strategic Management, Innovation and Econometrics, held at Chateau St. Gerlach, Valkenburg. We would like to thank the participants and in particular Franz Palm and John Hagedoorn for their helpful comments.