Firms’ ability to innovate and protect the fruits of their R&D investments is of ever increasing importance in a world of fast paced competition and imitation. With regard to protection, R&D managers are normally faced with the choice between keeping innovations secret and filing for patents. Compared to secrecy, patents have the distinct advantage of granting their holders a temporary monopoly on the use of an innovation (which normally last 20 years). However their use also presents serious drawbacks. Patents are costly, they imply the disclosure of the innovation, the timespan of protection is limited, and depending on the technology it might be easy to innovate around them. In practice these limitations entail that firms often choose to file for patents only when they have serious concerns about their ability to keep an innovation secret.