Uncertain design rights and design spillovers

Jussi Heikkilä (University of Jyvaskyla) & Mirva Peltoniemi, “Uncertain design rights and design spillovers: The case of sauna heater markets”

This case study investigates how the design right institution affects innovative activity and industry dynamics. We present an analysis of the commercialization process of a novel design in Finnish sauna heater markets, which is a mature and “locally” well-defined market with a few large incumbents and several smaller players. The case study illustrates how an industry shifts from technical innovation to design innovation regime. Our findings are consistent with the view that weak and uncertain (probabilistic) design rights may induce unwarranted beliefs about the scope of design right protection. Self-serving biases may further diverge the heterogeneous beliefs and increase the probability of failure in pre-trial negotiation and the probability of litigation. The welfare effects of uncertain design rights are unclear: on the other hand they may induce unjustified entrepreneurial optimism and excessive entry but on the other hand excessive entry of innovative entrepreneurs may lead to increased knowledge spillovers.