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Utilizing patent analysis to explore the cooperative competition relationship of the two LED companies: Nichia and Osram
Technological Forecasting & Social Change 78 (2011) 294–302
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Technological Forecasting & Social Change
Utilizing patent analysis to explore the cooperative competition relationship of the two LED companies: Nichia and Osram Yu-Shan Chen ⁎, Bi-Yu Chen Department of Business Administration, National Taipei University, Taipei, Taiwan
a r t i c l e
i n f o
Article history: Received 12 October 2009 Received in revised form 31 May 2010 Accepted 26 June 2010
Keywords: Patent analysis Co-opetition LED industry Patent portfolio Strategic interaction
a b s t r a c t This study used patent analysis to explore the co-opetition behavior between the two light emitting diode (LED) manufactures, Nichia and Osram, from the two critical technological fields in the LED industry: LED components and phosphor. The results of patent analysis indicated that Nichia had advantages in the field of LED components, while Osram had advantages in the field of phosphor. Therefore, there existed cooperation opportunities for the two opponents in the LED industry, because their technological capabilities were partially complementary. Therefore, Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other. Their strategic interaction was changed from full competition to co-opetition which is win–win for them. This study demonstrates that patent analysis is a useful tool for R&D management and technical analysis, and the results of this study can provide a valuable reference for managers in formulating patent portfolio. © 2010 Elsevier Inc. All rights reserved.
1. Introduction Light emitting diode (LED) industry is a high-tech industry and possesses two characteristics, technological development with high speed and intense market competition. Although LED was launched into the market at 1968, Nichia in Japan was the first company to possess the ability of mass production of white LED that is most practicable in 1996. Subsequently, other LED companies, e.g., Osram, Agilent, and GEL core, focus on the research and development of white LED. They also possess the ability of mass production of white LED after 2000. In the LED industry, the major LED manufactures, such as Nichia, Osram, Toyoda Gosei, Cree, Lumileds, etc., spend much resources on R&D [1]. The advantages of LED include greater energy efficiency, lower maintenance costs, longer lifetimes, broader design flexibility, and environmental friendliness [2]. Thus, LED can reduce overall energy usage in the U.S. by 10%, reduce global carbon emissions by tens of millions of tons per year [3]. White LED has high potential global market in the future, because its application is broad in the world. White LED can be generated from LEDs either by combining three individual monochromatic LEDs or by coating a blue LED with phosphorescent material [2]. Because combining three individual monochromatic LEDs is difficult to heat dissipation, coating a blue LED with phosphorescent material is a better solution for the generation of white LED. Nichia and Osram are both pioneers of the indium gallium nitride (InGaN) for white LED. The first commercially available white LED based on phosphors was produced by Nichia. Nichia used a blue light emitting InGaN and coated the chip with yellow fluorescent phosphor Y3 Al5O12: Ce (YAG: Ce), while Osram used Tb3Al5O12: Ce (TAG: Ce) for white light production later [4]. Nichia and Osram contribute excellent technologies to the LED market. At present, white LED is extensively applied to backlight of cell phone, personal digital assistant, LED screen, etc. In order to occupy the white LED market, there existed cooperation opportunities for the opponents in the LED industry. For example, Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other in 2002. ⁎ Corresponding author. Department of Business Administration, National Taipei University, 151, University Rd., San Shia, Taipei 237, Taiwan. Tel.: + 886 2 8674 6553; fax: + 886 2 8671 5912. E-mail address: [email protected] (Y.-S. Chen). 0040-1625/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2010.06.017
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Because LED companies need to develop high-tech, they focus on key technologies to apply patents in several major countries not only to secure the technological advantage of LED market but also to form the competition barriers of LED technologies. When the growth of the LED market is steadily high and the R&D competition of the LED related technologies is continuously intense, LED companies should pay more attention on patent analysis. Although a LED company can enhance technological capabilities and obtain competitive advantages via patent development, however, as it faces patent infringement lawsuit, it would spend much money and time on the patent infringement litigation. In addition, the LED company could not well concentrate on its business operation, R&D activities, and implementation of strategic plans such that it would lose its competitive capabilities and miss business opportunities indirectly. According to Antitrust Guidelines for the Licensing of Intellectual Property, the cross-licensing may provide mutual benefits by integrating complementary technologies, reducing transaction costs, clearing blocking positions, and avoiding costly infringement litigations. Therefore the cross-licensing is one of important strategic alternatives for LED companies if they face the threat of patent infringement lawsuit. The white LED area is a main field of patents, cross-licensing and infringement lawsuits in the LED industry [5]. After a long time of patent infringement lawsuits, Nichia and Osram signed a patent cross-licensing agreement in 2002 covering the rights of the LED chips and related packaging technology. In order to protect the intellectual property right (IPR) and to obtain the competitive advantage, there were many patent lawsuits among LED companies many years ago. However, Nichia and Osram, the two pioneers in LED industry, made a settlement of their patent lawsuits in June 2002 and agreed to offer cross-licensing of patents for each other in the technological fields of indium gallium nitride (InGaN) semiconductor and related packaging technology. Why did Nichia and Osram change their relationship from full competition to co-opetition? This study explores their co-opetition behaviors via patent analysis. Although previous studies argued companies can use the patent information to evaluate companies' R&D capabilities are complementary or substitutive to select the targeted merger and acquisition candidates [6], they did not mention the co-opetition behavior such as the cross-licensing strategy. In addition, although some previous studies applied patent indicators to explore the co-opetition strategy and suggested that the co-opetition strategy should be one of the major alternatives [7], they did not discuss companies' R&D capabilities are complementary or substitutive. Based on the mention above, this study does not only use the patent analysis to explore the co-opetition behavior between Nichia and Osram based on their cross-licensing, but also analyze their R&D capabilities are complementary or substitutive. Formulating the cross-licensing strategy needs to consider the viewpoints from both of the licensee and the licensor and to evaluate from the dynamic perspective, not the static one [8]. Patent data include complete R&D records which contain crosssectional and longitudinal information so that it is appropriate for companies to use patent information to monitor the technological development of competitors and to select the proper cross-licensing strategy. U.S. is one of huge markets in the world, so most high-tech companies are willing to apply their most potential patents in U.S. in order to protect the technological advantages and to shape the entry barriers. Therefore, this study pays attention on U.S. Patent and Trademark Office (USPTO) database to undertake the patent analysis of Nichia and Osram to explore their co-opetition behaviors. 2. Patent analysis Patents, one kind of firms' important intangible assets, cannot only provide competitive advantages, but also enable firms to generate revenue by selling the unique products from their R&D outputs [5,9]. The patent system is one of conventional commercial institutions and it is designed to encourage innovation. Inventors of patents obtain exclusive rights over the commercial exploitation of their patents for a specific period, but they should disclose their invention. Although one of the requisites of a patent is novelty, the importance of a patent is related to its usefulness and commercial value. As patent databases became more available in computer-readable form, an increasing number of researchers used patent databases not only to invent new products and technologies [10] but also to explore the relevant R&D managerial issues [11–16]. Widely available in the area of management, patent indicators not only represent the outcomes of inventions, but also display their commercial value. In addition, patent indicators cannot only measure firms' technological capabilities and competitive advantages [17], but also develop the patent map to discover new technology or business opportunities [18,19]. With respect to patent information, prior studies found out that patent information can provide more information than R&D information in financial statements [20–23]. Moreover, Trajtenberg argued that patent indicators can demonstrate the information of firms' R&D capabilities which were scarce in financial statements [24–26]. Prior researches pointed out that patent information can provide abundant information to complement financial data when evaluating corporate performance. Patent information can support technology management in five areas: support of R&D investment decisions, human resource management and knowledge management in R&D activities, effective protection of intellectual property right, identification and assessment of external technological sources, and value maximization of patent portfolio [12]. Effective patent protection is identified as one of important sources to obtain competitive advantages, because it provides two major functions: first, granted patents protect the assignees, at least for a period of time, from imitation; second, patent protection supports the internal use of technologies [27]. Patented technologies can be used to achieve important operational and strategic benefits and to obtain competitive advantages [27]. Patents contain important information for R&D management. The value of patent information can be attributed to several reasons: first, patent information is available even for companies that are not required to disclose R&D data; second, patent information can be discussed under several sub-fields (e.g. business units, products, technological fields, or inventors), and this enables companies to undertake more precise competitor analysis [28,29]. In addition, a large amount of technological information is contained in patents which are classified according to standardized schemes. Comparing to other information sources, patent
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information is often considered as the best source for the timely recognition of technological changes [30]. The change of a firm's patent development in technological fields is in accordance with the change of its R&D activities, so patent indicators can be used to analyze and to monitor companies' R&D strategies [12,29,31]. Therefore, patents can provide important information of firms' R&D capabilities and activities and enable companies to collect accurate strategic R&D information. The strategic use of intellectual property assets to enhance corporate competitive advantage increasingly becomes a vital tool of corporate strategy in the knowledge economy [32,33]. Patent statistics can be used to measure the output of the codified knowledge from R&D activities and industrial development [34]. Mogee and Kolar [35] defined the patent analysis could divide into technology-level [36], national-level [37], and firm-level analysis [38]. Mogee [39] suggested the application of patent analysis include rival analysis, technology tracking and forecasting, identifying important development, international strategic analysis and infringement monitoring and current. Moreover, patent analysis is appropriate to assess for merger [40] and to identify acquisition candidates [6] and technological collaboration [41]. 3. Co-opetition Over the past years, there has been a significant increase in the use of co-opetition as a strategic alternative. The concept of coopetition derives from an evolution of competitive strategy. Although there were more co-opetition relationships in industries, previous literature suggested that co-opetition relationships can produce better performance for the participating firms than competitive relationships [42]. The advantage of co-opetition results from the capability to manage cooperation and competition and to control partners or competitors. Previous studies argued that co-opetition arises as firms set the competitive alternative that is also advantageous for the other competitors in industries [43]. Co-opetition demonstrates the nature of the inter-firm interdependences where both competitive and cooperative actions co-exist. In addition, co-opetition is a synthesis between two opposite paradigms: the competitive paradigm, assuming that companies interact on the basis of a completely divergent interest structure, and the collaborative paradigm, asserting that companies interact on the basis of a fully convergent interest structure [44]. The co-opetition strategy is based on the concept that all strategic activities should aim for the establishment of mutually beneficial partner relationship with other actors in the co-opetition system [45]. Companies can live in symbiosis by coexisting with competition and cooperation, or survive in a relationship simultaneously containing both cooperation and competition (co-opetition) [46]. Interorganizational relationship constitutes a social structure of co-opetition, which manifests a strategy for cooperation as well as for competition [47]. Co-opetition behaviors can exist at multiple levels, including firms, strategic business units (SBUs), departments, and task groups [48]. Moreover, co-opetition refers to a cooperative and competitive model adopted by a firm for developing market, reducing cost to improve firm's competitiveness, and acquiring market leading position [47]. From the perspective of internal configuration, Luo [49] asserted that the major determinants of cooperation are strategic interdependence, subsidiary form, and technological linkage, and proposed that the major determinants of competition are local responsiveness, market overlap, and capability retrogression. Collaboration is competition in a different form [50]. Cooperation is important for companies to utilize a company's limited resources in the most efficient way. A new technological paradigm which rewards cooperation in the innovation of complex technologies seems to have emerged in recent years [51]. Furthermore, the benefits of cooperation include: (1) the cost for developing new products are divided among the cooperating companies; (2) the lead times are shorten; (3) each company can contribute with its core competence. Through competition, competitors are forced to further develop their products and to carry out their activities in the most efficient way [52]. Consequently, co-opetition can be regarded as an effective way of handling both cooperation and competition with competitors. Lado et al. [53] argued success in the business world nowadays often requires that companies pursue both competitive and cooperative strategies simultaneously. Das and Teng [54] and Brandenburger and Nalebuff [55] suggested that if competition is a game and companies can regard collaboration as a complementary way of competition. Companies can find ways to make the market bigger rather than fight with competitors over a fixed market. 4. Analysis indicators This study used patent analysis to explore the co-opetition behaviors between Nichia and Osram. The patent data of this study were obtained from U.S. Patent and Trademark Office (USPTO) database. This study conducted in-depth interviewing to find out the critical technological fields in the LED industry. We respectively interviewed with ten senior R&D experts who participated R&D projects with more than ten years of R&D experience in the LED industry. This study concluded that there are two critical technological fields in the LED industry: LED components and phosphor. Therefore, the keywords which were used to collect patent data from USPTO database in this study included: Light emitting, LED, and phosphor. In addition, Nichia and Osram are the assignees which were used to collect patent data from USPTO database in this study. The patent analysis in this study includes patent count analysis, U.S. patent classification (UPC) analysis, and patent citation analysis. 4.1. Patent count analysis Patent count analysis describes the number of patents applied or granted by the companies in the past years. Patent count analysis can measure the technological activities of the focal companies.
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4.2. UPC analysis Technological fields of patents in this study were discriminated according to UPC (U.S. patent classification). Based on UPC analysis, this study can assess the distribution of technological capabilities of the focal companies in different technological fields of patents. 4.3. Patent citation analysis Patent citation analysis does not only provide the information of the technological abilities of companies but also show the value of patents. Patent citations include both backward citations and forward citations. Backward patent citations are defined as the number of reference to prior patents, while forward patent citations are defined as the citations received from subsequent patents. Patent citations have been often interpreted as a measure of the knowledge diffusing outward from the patents. This study focuses on analysis of the forward patent citations. 5. Results and discussions 5.1. Patent count analysis in LED components According to Fig. 1, Nichia began to apply for its first patent of LED components in U.S. in 1988 and gratefully received its first grant of patent in 1989. Afterward, Nichia intermittently applied for patents of LED components from 1990 to 2001, and its patent applications of LED components grew up to 22 in 2002. In 2003, Nichia had 56 patent applications of LED components, such as it got 38 granted patents of LED components in 2004 and 44 ones in 2005. Moreover, Fig. 1 indicates the patent counts of Osram in LED components from 1999 to 2008. Contrast with Nichia, Osram applied its first patent of LED components in U.S. since 1999. Although Osram developed LED components later than Nichia did, Osram had 30 patent applications of LED components in 2002. With the accumulation of patent applications in previous several years, Osram got 31 granted patents of LED components in U.S. in 2006. Comparison between Nichia and Osram, Nichia accumulated 12 granted patents of LED components during the period of 1988–2001 and further owned 180 ones during the period of 2002–2008. On the other hand, Osram only accumulated 3 granted patents of LED components during the period of 1999–2001, and owned 121 ones during the period of 2002–2008. Thus, Nichia performed relatively better in LED components. 5.2. UPC analysis in LED components Fig. 2(a) shows the UPC breadth and depth of Nichia's patents in LED components. According to the UPC analysis in Fig. 2(a), the technological development of Nichia focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), D13 (Equipment for production, distribution, or transformation of energy), 313 (Electric lamp and discharge devices), 362 (Illumination), and 252 (Compositions). The UPC breadth of Nichia includes 16 classifications. The most depth classification is classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and its count is 164; the second one is classification D13 (Equipment for production, distribution, or transformation of energy). Every patent perhaps possesses more than one UPC, so total UPC counts of Nichia are more than its granted patent counts. According to the UPC analysis in Fig. 2(b), the technological development of Osram focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), 362 (Illumination), 313 (Electric lamp and discharge devices), 438 (Semiconductor device manufacturing: process), 252 (Compositions), 315 (Electric lamp and discharge devices: systems), and 445 (Electric lamp or space discharge component or device manufacturing). According to Fig. 2(b), the UPC breadth of Osram includes 18 classifications. The most depth classification is classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and its count is 234; the second one is classification 362 (Illumination). Furthermore, total UPC counts of Nichia are 644. Comparing the UPC analysis of LED components with Osram, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram has had wider technologic range than Nichia in LED components. Furthermore, Nichia focused on classification 257 and D13, while Osram focused on classification 257 and 362. Although Nichia and Osram compete in the area of classification 257, there are cooperation opportunities for them in the areas of classification D13 and 362.
Fig. 1. Patent counts of Nichia and Osram in LED components.
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Fig. 2. (a) UPC analysis of Nichia in LED components. (b) UPC analysis of Osram in LED components.
5.3. Patent count analysis in phosphor Fig. 3 describes the applied and granted patent counts of Nichia in the area of phosphor in U.S. It indicates that Nichia was engaged in patent activities related to phosphor since 1987 and intermittently involved in R&D activities in the area of phosphor during the period of 1987–2008. According to Fig. 3, Osram began to apply its first patent in phosphor in 1992 and had 4 to 8 patent applications each year during the period of 1992–2006. However, there is no Osram's applied patent counts in phosphor in the period of 2007–2008 in
Fig. 3. Patent counts of Nichia and Osram in phosphor.
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the patent database because of the time-lag effect. Comparing with Osram, Nichia accumulated 20 granted patents in phosphor during the period of 1989–2001, and got 17 ones during the period of 2002–2008. On the other hand, Osram accumulated 43 granted patents in phosphor during the period of 1993–2001, and owned 41 granted patents in phosphor during the period of 2002–2008. Thus, Osram performed relatively better in phosphor. 5.4. UPC analysis in phosphor Fig. 4(a) shows the UPC breadth and depth of Nichia's patents in phosphor. According to the UPC analysis in Fig. 4(a), the technological development of Nichia focused on classification 313 (Electric lamp and discharge devices), 252 (Compositions), 428 (Stock material or miscellaneous articles), and 257 (Active solid-state devices, e.g. transistors, solid-state diodes). The UPC breadth of Nichia in phosphor possessed 13 classifications, and the most depth classification is classification 313 (Electric lamp and discharge devices) and its count is 51; the second one is classification 252 (Compositions). According to the UPC analysis in Fig. 4(b), the technological development of Osram focused on classification 252 (Compositions), 427 (Coating processes), 313 (Electric lamp and discharge devices), 428 (Stock material or miscellaneous articles), 423 (Chemistry of inorganic compounds), and 257 (Active solid-state devices, e.g. transistors, solid-state diodes). The UPC breadth of Osram included 10 classifications, and the most depth classification is classification 252 (Compositions) and its count is 143; the second one is classification 427 (Coating processes) and its count is 79. Comparing the UPC analysis of phosphor with Osram, it indicates that Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. In addition, Nichia focused on classification 313 and 252, while Osram focused on classification 252 and 427. Although Nichia and Osram compete in the area of classification 252, there are cooperation opportunities for them in the areas of classification 313 and 427. 5.5. The comparison of the patent indicators between Nichia and Osram Table 1 summarizes the comparison of the patent indicators between Nichia and Osram. Nichia possesses advantage in LED components, because its patent counts and patent citations are better than Osram. Conversely, Osram possesses advantage in phosphor, because its patent counts and patent citations are better than Nichia. According to the UPC analysis in LED components, Nichia focused on classification 257 and D13, while Osram focused on classification 257 and 362. Although Nichia and Osram compete in the area of classification 257, there are cooperation opportunities for them in the areas of classification 362 and D13. According to the UPC analysis in phosphor, Nichia focused on classification 313 and 252, while Osram focused on classification 252 and 427. Although Nichia and Osram compete in the area of classification 252, there are cooperation opportunities for them in the
Fig. 4. (a) UPC analysis of Nichia in phosphor. (b) UPC analysis of Osram in phosphor.
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Table 1 The comparison of the patent indicators between Nichia and Osram. Technological fields
Patent indicators
Nichia
Osram
LED components
Patent counts Patent counts before 2001 Patent counts after 2002 Patent citations Main UPC classifications Breadth of UPC classifications Patent counts Patent counts before 2001 Patent counts after 2002 Patent citations Main UPC classifications Breadth of UPC classifications
192 12 180 581 257, D13 16 37 20 17 16 313, 252 13
124 3 121 52 257, 362 18 84 43 41 29 252, 427 10
Phosphor
areas of classification 313 and 427. Furthermore, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram had wider technologic range than Nichia in LED components. In addition, Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. 6. Conclusions After a long time of patent litigations, Nichia and Osram made a settlement and signed a patent cross-licensing agreement in 2002 covering the rights of the LED chips and related packaging technology. Although there were many patent lawsuits in the LED industry because of the protection of the IPR and the increase of the competitive advantage, Nichia and Osram, the two pioneers in LED industry, were willing to make a settlement of their patent lawsuits in June 2002 and agreed to offer cross-licensing of patents for each other in the technological fields of the LED chips and related packaging technology. Why did Nichia and Osram change their relationship from full competition to co-opetition? This study used patent analysis to explore the co-opetition behavior between the two LED manufactures, Nichia and Osram. The results showed that Nichia possesses advantage in LED components, because its patent counts and patent citations are better than Osram in this area. Conversely, Osram possesses advantage in phosphor, because its patent counts and patent citations are better than Nichia in this area. According to the UPC analysis in LED components, Nichia focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and D13 (Equipment for production, distribution, or transformation of energy), while Osram focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and 362 (Illumination). Although Nichia and Osram compete in the area of classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), there are cooperation opportunities for them in the areas of classification 362 (Illumination) and D13 (Equipment for production, distribution, or transformation of energy). According to the UPC analysis in phosphor, Nichia focused on classification 313 (Electric lamp and discharge devices) and 252 (Compositions), while Osram focused on classification 252 (Compositions) and 427 (Coating processes). Although Nichia and Osram compete in the area of classification 252 (Compositions), there are cooperation opportunities for them in the areas of classification 313 (Electric lamp and discharge devices) and 427 (Coating processes). Furthermore, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram had wider technologic range than Nichia in LED components. In addition, Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. This study applied the patent analysis to explore the co-opetition behavior between Nichia and Osram based on patent information. According to the patent analysis in this study, this study can answer why Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other. The reason is because their technological capabilities were partially complementary. Their strategic interaction was changed from full competition to co-opetition which is win–win for them. This study points out patent analysis is a powerful approach for R&D management and technical analysis, and the research result can offer a valuable reference for practitioners in formulating R&D strategies. The trend of the cross-licensing among the major LED manufactures, such as Nichia, Osram, Toyoda Gosei, Cree, Lumileds, etc., is more popular in the LED industry. For example, Nichia did not only settle its patent infringement lawsuit via cross-licensing with Osram to become the co-opetitors, but also sign patent cross-licensing agreements with Toyoda Gosei and Cree, because their R&D capabilities are complementary. However, although there is a patent infringement lawsuit between Nichia and Rohm, the crosslicensing did not occurred between them because their R&D capabilities are not complementary. If R&D capabilities of Nichia and Rohm become complementary in the future, there are possibilities that they become the co-opetitors according to the results of this study. In the LED industry, new entrants whose R&D capabilities can complement the existing co-opetitors' R&D weakness may affect the existing cross-licensing agreements in this industry and further influence the co-opetition relationships between the existing co-opetitors. This study argued that patent analysis is an effective approach to evaluate the cross-licensing decision and to select appropriate co-opetitors, because patent information contains complete technological data in industries, so that it is proper to be used to
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monitor the technological development of competitors. This study indicated that LED components and phosphor are not only important in the LED industry but also complementary in the LED technologies. Both of Nichia and Osram have their own advantages on the breadth and the depth in these two technological fields, which lead to the patent cross-licensing between the two companies. This study proposed a four-steps guideline on how LED firms make a decision regarding co-opetition based on patent analysis: the first step is to monitor the current and the future technological development in the LED industry; the second step is to analyze the advantages and disadvantages of technological capabilities of the potential candidates of co-opetitors via patent analysis; the third step is to evaluate technological compatibilities of both parties are complementary or not; and the final step is to make a decision regarding co-opetition or to select a targeted co-opetitor. This research was conducted in the LED industry. Future studies can focus on other industries to explore the relevant topics, and compare to this study. Moreover, this study explored the co-opetition relationship by use of patent analysis. Future studies can focus on other methods to explore the relevant topics, and compare to this study. In addition, future studies can link this research to other issues in the fields of strategic management and R&D management by use of patent analysis. Finally, we hope that the results of this study are beneficial to managers, researchers, or policy makers, and contribute to relevant studies and future researches as reference. Acknowledgement The authors are grateful for the funding of National Science Council in Taiwan for this study, and the project number of this study is NSC 95-2416-H-224-001-CC3. References [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35]
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Yu-Shan Chen is an associate professor in the Department of Business Administration of National Taipei University in Taiwan. His research interests focus on management of technology, innovation management, and patent analysis. He has published papers in Technological Forecasting and Social Change, Scientometrics, Technology Analysis and Strategic Management, Industrial Marketing Management, Quality and Quantity, Journal of Business Ethics, Total Quality Management & Business Excellence, Portland International Center for Management of Engineering and Technology (PICMET) '07–'09 Conference and other journals. Bi-Yu Chen is currently a Ph.D. candidate of Department of Business Administration, National Yunlin University of Science & Technology in Taiwan. Her research interests include the technology forecast, technology transfer, performance evaluation, and multiple criteria decision analysis. She has published papers in Quality and Quantity, Journal of Manufacturing Technology Management, The Journal of Grey System, Tamsui Oxford Journal of Management Sciences, Portland International Center for Management of Engineering and Technology (PICMET) '07 and '09 Conference and other journals.
Contents lists available at ScienceDirect
Technological Forecasting & Social Change
Utilizing patent analysis to explore the cooperative competition relationship of the two LED companies: Nichia and Osram Yu-Shan Chen ⁎, Bi-Yu Chen Department of Business Administration, National Taipei University, Taipei, Taiwan
a r t i c l e
i n f o
Article history: Received 12 October 2009 Received in revised form 31 May 2010 Accepted 26 June 2010
Keywords: Patent analysis Co-opetition LED industry Patent portfolio Strategic interaction
a b s t r a c t This study used patent analysis to explore the co-opetition behavior between the two light emitting diode (LED) manufactures, Nichia and Osram, from the two critical technological fields in the LED industry: LED components and phosphor. The results of patent analysis indicated that Nichia had advantages in the field of LED components, while Osram had advantages in the field of phosphor. Therefore, there existed cooperation opportunities for the two opponents in the LED industry, because their technological capabilities were partially complementary. Therefore, Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other. Their strategic interaction was changed from full competition to co-opetition which is win–win for them. This study demonstrates that patent analysis is a useful tool for R&D management and technical analysis, and the results of this study can provide a valuable reference for managers in formulating patent portfolio. © 2010 Elsevier Inc. All rights reserved.
1. Introduction Light emitting diode (LED) industry is a high-tech industry and possesses two characteristics, technological development with high speed and intense market competition. Although LED was launched into the market at 1968, Nichia in Japan was the first company to possess the ability of mass production of white LED that is most practicable in 1996. Subsequently, other LED companies, e.g., Osram, Agilent, and GEL core, focus on the research and development of white LED. They also possess the ability of mass production of white LED after 2000. In the LED industry, the major LED manufactures, such as Nichia, Osram, Toyoda Gosei, Cree, Lumileds, etc., spend much resources on R&D [1]. The advantages of LED include greater energy efficiency, lower maintenance costs, longer lifetimes, broader design flexibility, and environmental friendliness [2]. Thus, LED can reduce overall energy usage in the U.S. by 10%, reduce global carbon emissions by tens of millions of tons per year [3]. White LED has high potential global market in the future, because its application is broad in the world. White LED can be generated from LEDs either by combining three individual monochromatic LEDs or by coating a blue LED with phosphorescent material [2]. Because combining three individual monochromatic LEDs is difficult to heat dissipation, coating a blue LED with phosphorescent material is a better solution for the generation of white LED. Nichia and Osram are both pioneers of the indium gallium nitride (InGaN) for white LED. The first commercially available white LED based on phosphors was produced by Nichia. Nichia used a blue light emitting InGaN and coated the chip with yellow fluorescent phosphor Y3 Al5O12: Ce (YAG: Ce), while Osram used Tb3Al5O12: Ce (TAG: Ce) for white light production later [4]. Nichia and Osram contribute excellent technologies to the LED market. At present, white LED is extensively applied to backlight of cell phone, personal digital assistant, LED screen, etc. In order to occupy the white LED market, there existed cooperation opportunities for the opponents in the LED industry. For example, Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other in 2002. ⁎ Corresponding author. Department of Business Administration, National Taipei University, 151, University Rd., San Shia, Taipei 237, Taiwan. Tel.: + 886 2 8674 6553; fax: + 886 2 8671 5912. E-mail address: [email protected] (Y.-S. Chen). 0040-1625/$ – see front matter © 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2010.06.017
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Because LED companies need to develop high-tech, they focus on key technologies to apply patents in several major countries not only to secure the technological advantage of LED market but also to form the competition barriers of LED technologies. When the growth of the LED market is steadily high and the R&D competition of the LED related technologies is continuously intense, LED companies should pay more attention on patent analysis. Although a LED company can enhance technological capabilities and obtain competitive advantages via patent development, however, as it faces patent infringement lawsuit, it would spend much money and time on the patent infringement litigation. In addition, the LED company could not well concentrate on its business operation, R&D activities, and implementation of strategic plans such that it would lose its competitive capabilities and miss business opportunities indirectly. According to Antitrust Guidelines for the Licensing of Intellectual Property, the cross-licensing may provide mutual benefits by integrating complementary technologies, reducing transaction costs, clearing blocking positions, and avoiding costly infringement litigations. Therefore the cross-licensing is one of important strategic alternatives for LED companies if they face the threat of patent infringement lawsuit. The white LED area is a main field of patents, cross-licensing and infringement lawsuits in the LED industry [5]. After a long time of patent infringement lawsuits, Nichia and Osram signed a patent cross-licensing agreement in 2002 covering the rights of the LED chips and related packaging technology. In order to protect the intellectual property right (IPR) and to obtain the competitive advantage, there were many patent lawsuits among LED companies many years ago. However, Nichia and Osram, the two pioneers in LED industry, made a settlement of their patent lawsuits in June 2002 and agreed to offer cross-licensing of patents for each other in the technological fields of indium gallium nitride (InGaN) semiconductor and related packaging technology. Why did Nichia and Osram change their relationship from full competition to co-opetition? This study explores their co-opetition behaviors via patent analysis. Although previous studies argued companies can use the patent information to evaluate companies' R&D capabilities are complementary or substitutive to select the targeted merger and acquisition candidates [6], they did not mention the co-opetition behavior such as the cross-licensing strategy. In addition, although some previous studies applied patent indicators to explore the co-opetition strategy and suggested that the co-opetition strategy should be one of the major alternatives [7], they did not discuss companies' R&D capabilities are complementary or substitutive. Based on the mention above, this study does not only use the patent analysis to explore the co-opetition behavior between Nichia and Osram based on their cross-licensing, but also analyze their R&D capabilities are complementary or substitutive. Formulating the cross-licensing strategy needs to consider the viewpoints from both of the licensee and the licensor and to evaluate from the dynamic perspective, not the static one [8]. Patent data include complete R&D records which contain crosssectional and longitudinal information so that it is appropriate for companies to use patent information to monitor the technological development of competitors and to select the proper cross-licensing strategy. U.S. is one of huge markets in the world, so most high-tech companies are willing to apply their most potential patents in U.S. in order to protect the technological advantages and to shape the entry barriers. Therefore, this study pays attention on U.S. Patent and Trademark Office (USPTO) database to undertake the patent analysis of Nichia and Osram to explore their co-opetition behaviors. 2. Patent analysis Patents, one kind of firms' important intangible assets, cannot only provide competitive advantages, but also enable firms to generate revenue by selling the unique products from their R&D outputs [5,9]. The patent system is one of conventional commercial institutions and it is designed to encourage innovation. Inventors of patents obtain exclusive rights over the commercial exploitation of their patents for a specific period, but they should disclose their invention. Although one of the requisites of a patent is novelty, the importance of a patent is related to its usefulness and commercial value. As patent databases became more available in computer-readable form, an increasing number of researchers used patent databases not only to invent new products and technologies [10] but also to explore the relevant R&D managerial issues [11–16]. Widely available in the area of management, patent indicators not only represent the outcomes of inventions, but also display their commercial value. In addition, patent indicators cannot only measure firms' technological capabilities and competitive advantages [17], but also develop the patent map to discover new technology or business opportunities [18,19]. With respect to patent information, prior studies found out that patent information can provide more information than R&D information in financial statements [20–23]. Moreover, Trajtenberg argued that patent indicators can demonstrate the information of firms' R&D capabilities which were scarce in financial statements [24–26]. Prior researches pointed out that patent information can provide abundant information to complement financial data when evaluating corporate performance. Patent information can support technology management in five areas: support of R&D investment decisions, human resource management and knowledge management in R&D activities, effective protection of intellectual property right, identification and assessment of external technological sources, and value maximization of patent portfolio [12]. Effective patent protection is identified as one of important sources to obtain competitive advantages, because it provides two major functions: first, granted patents protect the assignees, at least for a period of time, from imitation; second, patent protection supports the internal use of technologies [27]. Patented technologies can be used to achieve important operational and strategic benefits and to obtain competitive advantages [27]. Patents contain important information for R&D management. The value of patent information can be attributed to several reasons: first, patent information is available even for companies that are not required to disclose R&D data; second, patent information can be discussed under several sub-fields (e.g. business units, products, technological fields, or inventors), and this enables companies to undertake more precise competitor analysis [28,29]. In addition, a large amount of technological information is contained in patents which are classified according to standardized schemes. Comparing to other information sources, patent
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information is often considered as the best source for the timely recognition of technological changes [30]. The change of a firm's patent development in technological fields is in accordance with the change of its R&D activities, so patent indicators can be used to analyze and to monitor companies' R&D strategies [12,29,31]. Therefore, patents can provide important information of firms' R&D capabilities and activities and enable companies to collect accurate strategic R&D information. The strategic use of intellectual property assets to enhance corporate competitive advantage increasingly becomes a vital tool of corporate strategy in the knowledge economy [32,33]. Patent statistics can be used to measure the output of the codified knowledge from R&D activities and industrial development [34]. Mogee and Kolar [35] defined the patent analysis could divide into technology-level [36], national-level [37], and firm-level analysis [38]. Mogee [39] suggested the application of patent analysis include rival analysis, technology tracking and forecasting, identifying important development, international strategic analysis and infringement monitoring and current. Moreover, patent analysis is appropriate to assess for merger [40] and to identify acquisition candidates [6] and technological collaboration [41]. 3. Co-opetition Over the past years, there has been a significant increase in the use of co-opetition as a strategic alternative. The concept of coopetition derives from an evolution of competitive strategy. Although there were more co-opetition relationships in industries, previous literature suggested that co-opetition relationships can produce better performance for the participating firms than competitive relationships [42]. The advantage of co-opetition results from the capability to manage cooperation and competition and to control partners or competitors. Previous studies argued that co-opetition arises as firms set the competitive alternative that is also advantageous for the other competitors in industries [43]. Co-opetition demonstrates the nature of the inter-firm interdependences where both competitive and cooperative actions co-exist. In addition, co-opetition is a synthesis between two opposite paradigms: the competitive paradigm, assuming that companies interact on the basis of a completely divergent interest structure, and the collaborative paradigm, asserting that companies interact on the basis of a fully convergent interest structure [44]. The co-opetition strategy is based on the concept that all strategic activities should aim for the establishment of mutually beneficial partner relationship with other actors in the co-opetition system [45]. Companies can live in symbiosis by coexisting with competition and cooperation, or survive in a relationship simultaneously containing both cooperation and competition (co-opetition) [46]. Interorganizational relationship constitutes a social structure of co-opetition, which manifests a strategy for cooperation as well as for competition [47]. Co-opetition behaviors can exist at multiple levels, including firms, strategic business units (SBUs), departments, and task groups [48]. Moreover, co-opetition refers to a cooperative and competitive model adopted by a firm for developing market, reducing cost to improve firm's competitiveness, and acquiring market leading position [47]. From the perspective of internal configuration, Luo [49] asserted that the major determinants of cooperation are strategic interdependence, subsidiary form, and technological linkage, and proposed that the major determinants of competition are local responsiveness, market overlap, and capability retrogression. Collaboration is competition in a different form [50]. Cooperation is important for companies to utilize a company's limited resources in the most efficient way. A new technological paradigm which rewards cooperation in the innovation of complex technologies seems to have emerged in recent years [51]. Furthermore, the benefits of cooperation include: (1) the cost for developing new products are divided among the cooperating companies; (2) the lead times are shorten; (3) each company can contribute with its core competence. Through competition, competitors are forced to further develop their products and to carry out their activities in the most efficient way [52]. Consequently, co-opetition can be regarded as an effective way of handling both cooperation and competition with competitors. Lado et al. [53] argued success in the business world nowadays often requires that companies pursue both competitive and cooperative strategies simultaneously. Das and Teng [54] and Brandenburger and Nalebuff [55] suggested that if competition is a game and companies can regard collaboration as a complementary way of competition. Companies can find ways to make the market bigger rather than fight with competitors over a fixed market. 4. Analysis indicators This study used patent analysis to explore the co-opetition behaviors between Nichia and Osram. The patent data of this study were obtained from U.S. Patent and Trademark Office (USPTO) database. This study conducted in-depth interviewing to find out the critical technological fields in the LED industry. We respectively interviewed with ten senior R&D experts who participated R&D projects with more than ten years of R&D experience in the LED industry. This study concluded that there are two critical technological fields in the LED industry: LED components and phosphor. Therefore, the keywords which were used to collect patent data from USPTO database in this study included: Light emitting, LED, and phosphor. In addition, Nichia and Osram are the assignees which were used to collect patent data from USPTO database in this study. The patent analysis in this study includes patent count analysis, U.S. patent classification (UPC) analysis, and patent citation analysis. 4.1. Patent count analysis Patent count analysis describes the number of patents applied or granted by the companies in the past years. Patent count analysis can measure the technological activities of the focal companies.
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4.2. UPC analysis Technological fields of patents in this study were discriminated according to UPC (U.S. patent classification). Based on UPC analysis, this study can assess the distribution of technological capabilities of the focal companies in different technological fields of patents. 4.3. Patent citation analysis Patent citation analysis does not only provide the information of the technological abilities of companies but also show the value of patents. Patent citations include both backward citations and forward citations. Backward patent citations are defined as the number of reference to prior patents, while forward patent citations are defined as the citations received from subsequent patents. Patent citations have been often interpreted as a measure of the knowledge diffusing outward from the patents. This study focuses on analysis of the forward patent citations. 5. Results and discussions 5.1. Patent count analysis in LED components According to Fig. 1, Nichia began to apply for its first patent of LED components in U.S. in 1988 and gratefully received its first grant of patent in 1989. Afterward, Nichia intermittently applied for patents of LED components from 1990 to 2001, and its patent applications of LED components grew up to 22 in 2002. In 2003, Nichia had 56 patent applications of LED components, such as it got 38 granted patents of LED components in 2004 and 44 ones in 2005. Moreover, Fig. 1 indicates the patent counts of Osram in LED components from 1999 to 2008. Contrast with Nichia, Osram applied its first patent of LED components in U.S. since 1999. Although Osram developed LED components later than Nichia did, Osram had 30 patent applications of LED components in 2002. With the accumulation of patent applications in previous several years, Osram got 31 granted patents of LED components in U.S. in 2006. Comparison between Nichia and Osram, Nichia accumulated 12 granted patents of LED components during the period of 1988–2001 and further owned 180 ones during the period of 2002–2008. On the other hand, Osram only accumulated 3 granted patents of LED components during the period of 1999–2001, and owned 121 ones during the period of 2002–2008. Thus, Nichia performed relatively better in LED components. 5.2. UPC analysis in LED components Fig. 2(a) shows the UPC breadth and depth of Nichia's patents in LED components. According to the UPC analysis in Fig. 2(a), the technological development of Nichia focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), D13 (Equipment for production, distribution, or transformation of energy), 313 (Electric lamp and discharge devices), 362 (Illumination), and 252 (Compositions). The UPC breadth of Nichia includes 16 classifications. The most depth classification is classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and its count is 164; the second one is classification D13 (Equipment for production, distribution, or transformation of energy). Every patent perhaps possesses more than one UPC, so total UPC counts of Nichia are more than its granted patent counts. According to the UPC analysis in Fig. 2(b), the technological development of Osram focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), 362 (Illumination), 313 (Electric lamp and discharge devices), 438 (Semiconductor device manufacturing: process), 252 (Compositions), 315 (Electric lamp and discharge devices: systems), and 445 (Electric lamp or space discharge component or device manufacturing). According to Fig. 2(b), the UPC breadth of Osram includes 18 classifications. The most depth classification is classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and its count is 234; the second one is classification 362 (Illumination). Furthermore, total UPC counts of Nichia are 644. Comparing the UPC analysis of LED components with Osram, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram has had wider technologic range than Nichia in LED components. Furthermore, Nichia focused on classification 257 and D13, while Osram focused on classification 257 and 362. Although Nichia and Osram compete in the area of classification 257, there are cooperation opportunities for them in the areas of classification D13 and 362.
Fig. 1. Patent counts of Nichia and Osram in LED components.
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Fig. 2. (a) UPC analysis of Nichia in LED components. (b) UPC analysis of Osram in LED components.
5.3. Patent count analysis in phosphor Fig. 3 describes the applied and granted patent counts of Nichia in the area of phosphor in U.S. It indicates that Nichia was engaged in patent activities related to phosphor since 1987 and intermittently involved in R&D activities in the area of phosphor during the period of 1987–2008. According to Fig. 3, Osram began to apply its first patent in phosphor in 1992 and had 4 to 8 patent applications each year during the period of 1992–2006. However, there is no Osram's applied patent counts in phosphor in the period of 2007–2008 in
Fig. 3. Patent counts of Nichia and Osram in phosphor.
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the patent database because of the time-lag effect. Comparing with Osram, Nichia accumulated 20 granted patents in phosphor during the period of 1989–2001, and got 17 ones during the period of 2002–2008. On the other hand, Osram accumulated 43 granted patents in phosphor during the period of 1993–2001, and owned 41 granted patents in phosphor during the period of 2002–2008. Thus, Osram performed relatively better in phosphor. 5.4. UPC analysis in phosphor Fig. 4(a) shows the UPC breadth and depth of Nichia's patents in phosphor. According to the UPC analysis in Fig. 4(a), the technological development of Nichia focused on classification 313 (Electric lamp and discharge devices), 252 (Compositions), 428 (Stock material or miscellaneous articles), and 257 (Active solid-state devices, e.g. transistors, solid-state diodes). The UPC breadth of Nichia in phosphor possessed 13 classifications, and the most depth classification is classification 313 (Electric lamp and discharge devices) and its count is 51; the second one is classification 252 (Compositions). According to the UPC analysis in Fig. 4(b), the technological development of Osram focused on classification 252 (Compositions), 427 (Coating processes), 313 (Electric lamp and discharge devices), 428 (Stock material or miscellaneous articles), 423 (Chemistry of inorganic compounds), and 257 (Active solid-state devices, e.g. transistors, solid-state diodes). The UPC breadth of Osram included 10 classifications, and the most depth classification is classification 252 (Compositions) and its count is 143; the second one is classification 427 (Coating processes) and its count is 79. Comparing the UPC analysis of phosphor with Osram, it indicates that Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. In addition, Nichia focused on classification 313 and 252, while Osram focused on classification 252 and 427. Although Nichia and Osram compete in the area of classification 252, there are cooperation opportunities for them in the areas of classification 313 and 427. 5.5. The comparison of the patent indicators between Nichia and Osram Table 1 summarizes the comparison of the patent indicators between Nichia and Osram. Nichia possesses advantage in LED components, because its patent counts and patent citations are better than Osram. Conversely, Osram possesses advantage in phosphor, because its patent counts and patent citations are better than Nichia. According to the UPC analysis in LED components, Nichia focused on classification 257 and D13, while Osram focused on classification 257 and 362. Although Nichia and Osram compete in the area of classification 257, there are cooperation opportunities for them in the areas of classification 362 and D13. According to the UPC analysis in phosphor, Nichia focused on classification 313 and 252, while Osram focused on classification 252 and 427. Although Nichia and Osram compete in the area of classification 252, there are cooperation opportunities for them in the
Fig. 4. (a) UPC analysis of Nichia in phosphor. (b) UPC analysis of Osram in phosphor.
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Table 1 The comparison of the patent indicators between Nichia and Osram. Technological fields
Patent indicators
Nichia
Osram
LED components
Patent counts Patent counts before 2001 Patent counts after 2002 Patent citations Main UPC classifications Breadth of UPC classifications Patent counts Patent counts before 2001 Patent counts after 2002 Patent citations Main UPC classifications Breadth of UPC classifications
192 12 180 581 257, D13 16 37 20 17 16 313, 252 13
124 3 121 52 257, 362 18 84 43 41 29 252, 427 10
Phosphor
areas of classification 313 and 427. Furthermore, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram had wider technologic range than Nichia in LED components. In addition, Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. 6. Conclusions After a long time of patent litigations, Nichia and Osram made a settlement and signed a patent cross-licensing agreement in 2002 covering the rights of the LED chips and related packaging technology. Although there were many patent lawsuits in the LED industry because of the protection of the IPR and the increase of the competitive advantage, Nichia and Osram, the two pioneers in LED industry, were willing to make a settlement of their patent lawsuits in June 2002 and agreed to offer cross-licensing of patents for each other in the technological fields of the LED chips and related packaging technology. Why did Nichia and Osram change their relationship from full competition to co-opetition? This study used patent analysis to explore the co-opetition behavior between the two LED manufactures, Nichia and Osram. The results showed that Nichia possesses advantage in LED components, because its patent counts and patent citations are better than Osram in this area. Conversely, Osram possesses advantage in phosphor, because its patent counts and patent citations are better than Nichia in this area. According to the UPC analysis in LED components, Nichia focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and D13 (Equipment for production, distribution, or transformation of energy), while Osram focused on classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes) and 362 (Illumination). Although Nichia and Osram compete in the area of classification 257 (Active solid-state devices, e.g. transistors or solid-state diodes), there are cooperation opportunities for them in the areas of classification 362 (Illumination) and D13 (Equipment for production, distribution, or transformation of energy). According to the UPC analysis in phosphor, Nichia focused on classification 313 (Electric lamp and discharge devices) and 252 (Compositions), while Osram focused on classification 252 (Compositions) and 427 (Coating processes). Although Nichia and Osram compete in the area of classification 252 (Compositions), there are cooperation opportunities for them in the areas of classification 313 (Electric lamp and discharge devices) and 427 (Coating processes). Furthermore, Nichia captured 16 UPC classifications, while Osram possessed 18 ones. It means that Osram had wider technologic range than Nichia in LED components. In addition, Nichia owned 13 UPC classifications, while Osram possessed 10 ones. Therefore, Nichia had wider technologic range than Osram in phosphor. This study applied the patent analysis to explore the co-opetition behavior between Nichia and Osram based on patent information. According to the patent analysis in this study, this study can answer why Nichia and Osram were willing to make a compromise to solve the patent litigations between them and further agreed to offer cross-licensing of patents for each other. The reason is because their technological capabilities were partially complementary. Their strategic interaction was changed from full competition to co-opetition which is win–win for them. This study points out patent analysis is a powerful approach for R&D management and technical analysis, and the research result can offer a valuable reference for practitioners in formulating R&D strategies. The trend of the cross-licensing among the major LED manufactures, such as Nichia, Osram, Toyoda Gosei, Cree, Lumileds, etc., is more popular in the LED industry. For example, Nichia did not only settle its patent infringement lawsuit via cross-licensing with Osram to become the co-opetitors, but also sign patent cross-licensing agreements with Toyoda Gosei and Cree, because their R&D capabilities are complementary. However, although there is a patent infringement lawsuit between Nichia and Rohm, the crosslicensing did not occurred between them because their R&D capabilities are not complementary. If R&D capabilities of Nichia and Rohm become complementary in the future, there are possibilities that they become the co-opetitors according to the results of this study. In the LED industry, new entrants whose R&D capabilities can complement the existing co-opetitors' R&D weakness may affect the existing cross-licensing agreements in this industry and further influence the co-opetition relationships between the existing co-opetitors. This study argued that patent analysis is an effective approach to evaluate the cross-licensing decision and to select appropriate co-opetitors, because patent information contains complete technological data in industries, so that it is proper to be used to
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monitor the technological development of competitors. This study indicated that LED components and phosphor are not only important in the LED industry but also complementary in the LED technologies. Both of Nichia and Osram have their own advantages on the breadth and the depth in these two technological fields, which lead to the patent cross-licensing between the two companies. This study proposed a four-steps guideline on how LED firms make a decision regarding co-opetition based on patent analysis: the first step is to monitor the current and the future technological development in the LED industry; the second step is to analyze the advantages and disadvantages of technological capabilities of the potential candidates of co-opetitors via patent analysis; the third step is to evaluate technological compatibilities of both parties are complementary or not; and the final step is to make a decision regarding co-opetition or to select a targeted co-opetitor. This research was conducted in the LED industry. Future studies can focus on other industries to explore the relevant topics, and compare to this study. Moreover, this study explored the co-opetition relationship by use of patent analysis. Future studies can focus on other methods to explore the relevant topics, and compare to this study. In addition, future studies can link this research to other issues in the fields of strategic management and R&D management by use of patent analysis. Finally, we hope that the results of this study are beneficial to managers, researchers, or policy makers, and contribute to relevant studies and future researches as reference. Acknowledgement The authors are grateful for the funding of National Science Council in Taiwan for this study, and the project number of this study is NSC 95-2416-H-224-001-CC3. References [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35]
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Yu-Shan Chen is an associate professor in the Department of Business Administration of National Taipei University in Taiwan. His research interests focus on management of technology, innovation management, and patent analysis. He has published papers in Technological Forecasting and Social Change, Scientometrics, Technology Analysis and Strategic Management, Industrial Marketing Management, Quality and Quantity, Journal of Business Ethics, Total Quality Management & Business Excellence, Portland International Center for Management of Engineering and Technology (PICMET) '07–'09 Conference and other journals. Bi-Yu Chen is currently a Ph.D. candidate of Department of Business Administration, National Yunlin University of Science & Technology in Taiwan. Her research interests include the technology forecast, technology transfer, performance evaluation, and multiple criteria decision analysis. She has published papers in Quality and Quantity, Journal of Manufacturing Technology Management, The Journal of Grey System, Tamsui Oxford Journal of Management Sciences, Portland International Center for Management of Engineering and Technology (PICMET) '07 and '09 Conference and other journals.