Felix Pöge (Max Planck): "Competition and Innovation: The Breakup of IG Farben"

Felix Pöge (Max Planck Institute for Innovation and Competition) presenting his paper at the EPFL Virtual Innovation Seminar on June 3, 2021.

Title. Competition and Innovation: The Breakup of IG Farben

Abstract. This study investigates use of a prevalent but rarely studied form of intellectual property protection: trade secrets. Building on existing survey evidence of firm-level, cross-sectional use of secrecy, we explore the effect of stronger legal trade secret protection on the use of trade secrets, and the rate and nature of secret innovation. Our setting is the US oil and gas hydraulic fracturing (fracking) industry, from 2013 to 2018, in states where firms are required to disclose fracking ingredients to regulators barring substantiated claims of trade secrets. We examine how the enactment of the federal 2016 Defend Trade Secrets Act (DTSA) affects well-level trade secret use across states with varying levels of pre-DTSA trade secret protection. We find substantial increases in the use of trade secrets, the generation of new trade secrets, recombination across sources, and the breadth and complexity of secret invention. Our results provide rare systematic empirical evidence on actual trade secret use and documents how stronger formal appropriability shapes secret innovation.