Abstract
Patent breadth and length have been discussed extensively in innovation literature. In this article, I analyze the optimal degree of novelty of patent protection and its tradeoff with patent length. In the context of subsequent innovations each innovation builds on the previous one. The degree of novelty necessary for a non-infringing patent is crucial for the firms’ incentive to innovate. One of the findings is that a monopolist’s optimal degree of novelty is lesser than would be socially desirable. Furthermore, there exists a finite optimal patent length. Competitors introducing an improved technology cause uncertainty which may be compensated by extending patent length.
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Notes
The term ‘patent height’ is used by van Dijk (1996). This is equivalent to ‘minimum inventive step’ in Gallini and Scotchmer (2002, p. 66) or Scotchmer (2005) or to ‘leading breadth’ in O’Donoghue et al. (1998). O’Donoghue (1998, p. 657) makes a further distinction to ‘patentability requirement’ which does not protect from a patent on an improved technology in contrast to an improved product that is marketed.
See Denicolò (2000, p. 495). He analyzes welfare effects of patent races with different modes of innovation. These may or may not be patentable or infringing. The highest social gain is achieved when innovations are not infringing or patentable.
See O’Donoghue et al. (1998, pp 4, 8) who distinguish the effective patent life which may be shorter than the statutory patent life which I denote by T.
See Tirole (1992, p 392f) for a discussion of the efficiency and the replacement effect.
This is analogous to O’Donoghue et al. (1998).
See Gambardella et al. (2005).
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Acknowledgements
Financial support from the Deutsche Forschungsgemeinschaft through SFB/TR 15 is gratefully acknowledged. I am grateful to Gerhard Clemenz and Uwe Dulleck at NOeG2005, Konrad Stahl, the seminar participants at INNO-tec, and two anonymous referees for very helpful comments.
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Beschorner, P.F.E. Optimal patent length and height. Empirica 35, 233–240 (2008). https://doi.org/10.1007/s10663-007-9059-7
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DOI: https://doi.org/10.1007/s10663-007-9059-7