Patent Breadth, Patent Life, and the Pace of Technological Progress
Cornell University - Department of Economics
University of California - Department of Economics ; School of Law, University of California, Berkeley; National Bureau of Economic Research (NBER)
Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE); Centre for Economic Policy Research (CEPR)
Journal of Economics and Management Strategy, Vol. 7, No. 1, 1998
In active investment climates where firms sequentially improve each other's products, a patent can terminate either because it expires or because a noninfringing innovation displaces its product in the market. We define the length of time until one of these happens as the effective patent life, and show how it depends on patent breadth. We distinguish "lagging" breadth, which protects against imitation, from "leading" breadth, which protects against new improved products. We compare two types of patent policy with leading breadth: (i) patents are finite but very broad, so that the effective life of a patent coincides with its statutory life, and (ii) patents are long but narrow, so that the effective life of a patent ends when a better product replaces it. The former policy improves the diffusion of new products, but the latter has lower R&D costs.
JEL Classification: O31
Date posted: January 27, 1999