1. The European Commission investigated the proposed merger of Dow and DuPont in 2016 focusing on potential impacts in agriculture and material sciences. 2. The Commission analyzed patent data from Dow and DuPont using the Patent Asset Index, finding they were strong innovators with significant combined patent shares for new crop protection technologies. 3. Based on the patent analysis showing high concentration and that Dow and DuPont were close competitors, the Commission concluded the merger could reduce innovation in crop protection and only approved it on the condition that the companies divest DuPont's crop protection business.

1. DO MERGERS STIFLE
INNOVATION?
The European Commission’s use of the Patent
Asset IndexTM in the Dow/DuPont merger case
Anna Maria Villa
IC-SDV Nice, April 2018

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DECEMBER 2015: DOW AND DUPONT ANNOUNCE THE PLANNED MERGER

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THE COMBINED ACTIVITIES WOULD GIVE RISE TO THREE BUSINESS AREAS
Agriculture
Revenue: approx 19B
Material Sciences
Revenue: approx 51B
Specialty Products
Revenue: approx 13B
Dow + DuPont

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THE EUROPEAN COMMISSION OPENED AN INVESTIGATION ON AGRICULTURE &
MATERIAL SCIENCES IN 2016
Agriculture
Revenue: approx 19B
Material Sciences
Revenue: approx 51B
Specialty Products
Revenue: approx 13B
Dow + DuPont

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THE COMMISSION’S M&A COMPETITION ASSESSMENT ARE LED ON PRODUCTS,
INNOVATION AND PRICES
Products
Prices Innovation
Innovation concerns normally emerge
in markets in which the merging
parties have strong innovation
capabilities and/or track records, are
facing few rivals and where barriers to
entry in research and development
are significant.
“
Directorate-General for Competition, European
Commission

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INNOVATION COMPETITION TAKES CENTER-STAGE
Innovation has become “so
important” for future competition
“because the viability of the
product line depends on your
ability to keep on innovating.”
Margrethe Vestager,
European
Commissioner for
Competition

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CROP PROTECTION: THE IMPORTANCE OF THE MERGING PARTIES AS
INNOVATORS WAS ASSESSED BY ANALYSIS OF PATENT DATA
ØCompetitiveImpact
Active patent families
Dow
DuPont
DowDuPont

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THE EUROPEAN COMMISSION UNDERLINED THE QUALITY OF PATENTS AS AN
OBJECTIVE MEASURE OF INNOVATION
Dow/DuPont European Commission
• Quality: Patent family value• Quantity: Patent application
counts
• Patent applications
from 1990 - 2015
• Recent and active patent families
published in 2000-2015
• All patents related to crop
protection
• All patents relevant to crop
protection industry in the
European Economic Area
Innovation
analysis based
on patents

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THE EUROPEAN COMMISSION USED PATENTSIGHT AS A TRUSTED SOURCE OF
PATENT ANALYSIS
“…It [PatentSight] is recognized in the industry as a
reference as regards patents.
Commission Decision, Merger
Procedure Regulation (EC) 139/2004
“We are grateful to PatentSight for their technical
support during the Dow/DuPont investigation.
Buehler, Coublucq, Hariton, Langus, and Valletti;
Review of Industrial Organization (2017)

10. TECHNOLOGY RELEVANCE™
Worldwide citations received
from later patents, adjusted
for age, patent office practices
and technology field
Average value: 1
MARKET COVERAGE™
Market size protected by
active patents and pending
patent applications on a
certain invention
Value of a granted US patent: 1
PATENT
ASSET
INDEX™
(Sum of all
Competitive
Impacts of an
entire portfolio)
THE PATENT ASSET INDEXTM BUILDS ON TWO KPIS WHICH HAVE SHOWN HIGHEST
CORRELATION IN SCIENTIFIC RESEARCH TO ESTIMATE REAL VALUE
COMPETITIVE
IMPACT™
(Individual patent
strength)
The relative
business value of
a patent
Later
Patent
Individual
Patent
The scientific publication was made in: Ernst, H., Omland, N. (2011): The Patent Asset Index – A New Approach to Benchmark Patent Portfolios.
World Patent Information 33, pp. 34–41. An overview can be found in the document “Introduction to the Patent Asset Index” available from
PatentSight.
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∑
Presentation for IC-SDV Nice 2018

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SCIENTIFIC & CUSTOMER VALUATION STUDIES SHOW ~80% ACCURACY OF THE
PATENT ASSET INDEX™ METHODOLOGY
7,8
0,7
0
2
4
6
8
Opposed patents Abandoned patents
The average
Competitive Impact of
opposed patents is
significantly higher
ØCompetitiveImpact
 Considered a key patent
 Attacked and defended
 Enforced in court
 Maintained longer
 Commercialized
 Standard-relevant
Validation studies
Patents with a high Competitive Impact are
more frequently
Sample: 74.732 patent families. Source: Ernst, H., Omland, N. (2011): The Patent Asset Index - A New Approach to Benchmark Patent Portfolios.
World Patent Information 33, pp. 34–41.
Presentation for IC-SDV Nice 2018
In the Dow/DuPont case the European Commission found that the top
10% of patents related to blockbuster products, the most successful
products in terms of sales.

12. 1. Dow and DuPont were particularly strong innovators (on the basis of external as
well as total citations)
2. Dow and DuPont had a significant combined patent share for the period 2000-
2015 for new active ingredients (AI) in crop protection, in particular herbicides
and insecticides
3. Patent shares indicate a high level of concentration already pre-merger with a
significant increase after the merger
4. Dow and DuPont were very close competitors for past innovations (based on
their best quality patents and high level of cross-citations)
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THE FINDINGS INDICATE DOW AND DUPONT AS STRONG INNOVATORS AND
CLOSE COMPETITORS

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IN THE FIELD OF CROP PROTECTION THERE WERE ONLY SIX MAJOR PRE-
MERGER PLAYERS
Active patent families
ØCompetitiveImpact
Bubble area:
Patent Asset Index™

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THE EUROPEAN COMMISSION CONCLUDED THE DOW/DUPONT MERGER TO BE
CONDITIONAL ON THE DIVESTURE OF THEIR CROP PROTECTION BUSINESS
DuPont
Dow
Bayer
Syngenta
BASF Monsanto
Dow/DuPont
[50-60]%
[20-30]%
[10-20]%
[5-10]% [0-5]%
Percentage shares in top 10% most valuable crop protection patents, value as measured by the Patent Asset Index™
(Source: European Commission investigations referring to PatentSight)
© 2017
The merged entity
Dow/DuPont would
hold a share of 50-
60% in the top 10%
most valuable crop
protection patents.

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THE MERGER WAS FINALIZED 2017
Agriculture: FMC acquired DuPont‘s crop
protection business
Material Science: SK acquires Dow
Chemical‘s acid co-polymers and
ionomers business

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THE FUTURE? INNOVATION COMPETITION HAS BEEN ANALYZED FOR THE NEXT
MERGER

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REFERENCES AND SOURCES
Ernst, H., Omland, N. 2011. The Patent Asset Index - A New Approach to Benchmark Patent Portfolios, World Patent Information,
33, pp. 34-41.
Omland, N. 2011. Valuing patents through indicators, in: Munari, F. and Oriani, R. (eds.): The Economic Valuation of Patents -
Methods and Applications, pp. 169-201, Edward Elgar, Cheltenham.
Bertuzzi A., Blanco Thomas S., Coublucq D., Jonckheere J., Tew J., Deisenhofer T., 2017. Dow/DuPont: protecting product and
innovation competition, Competition merger brief 2, pp.1-8,
http://ec.europa.eu/competition/publications/cmb/2017/kdal17002enn.pdf
Buehler, B., Coublucq, D., Hariton, C., Langus, G., Valletti T.. 2017 Recent Developments at DG Competition: 2016/2017,
Rev.Ind.Organ. 51, pp. 397-422. https://doi.org/10.1007/s11151-017-9592-x
Dow/DuPont Case Overview http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_7932
European Commission Case M.7932 – Dow/DuPont Merger Procedure Regulation (EC) 139/2004 - Preliminary public version of the
decision http://ec.europa.eu/competition/mergers/cases/decisions/m7932_13668_3.pdf
European Commission Press Release , Brussels, March 27th, 2017 Mergers: Commission clears merger between Dow and DuPont,
subject to conditions http://europa.eu/rapid/press-release_IP-17-772_en.htm
Financial Times https://www.ft.com/content/dfcde2d2-a006-11e5-8613-08e211ea5317
The Guardian https://www.theguardian.com/business/2015/dec/11/dow-chemical-dupont-merger-dowdupont
Dow Investor Information: http://s2.q4cdn.com/752917794/files/doc_downloads/2016/dowfilings/investor-presentation_final-12-
11-15.pdf
Press Release, merger finalization: https://www.dow.com/en-us/news/press-releases/dowdupont-merger-successfully-completed
FMC acquisition of DuPont’s Crop Protection Business : http://www.fmc.com/fmc-acquisition
SK acquisition of Dow’s Material Science Business https://www.acq5.com/post/sk-global-chemical-to-acquire-the-dow-chemical-s-
global-ethylene-acrylic-acid-copolymers-and-ionomers-business/

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THE COMMISSION’S CONCERNS ARE RELATED TO THE POSSIBILITY THAT,
FOLLOWING THE TRANSACTION:
(i) the merging parties will limit future price competition between their forthcoming
and their existing products, or between their forthcoming products; and
(ii) the merged entity will discontinue, delay, or redirect its efforts in each of the
merging parties’ pre-merger lines of research.
The innovation concerns are also related to the possibility that:
(iii) the transaction will remove one of the few competitors with innovation capabilities
in these markets.

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THE HARM TO INNOVATION, IN THE ABSENCE OF EFFICIENCIES, IS MORE LIKELY
WHEN:
“ the merging parties have overlapping research targets; the
parties are significant competitors in a concentrated
industry; and the barriers to entry are high.
.
Buehler, Coublucq, Hariton, Langus, and Valletti; Review
of Industrial Organization (2017)