Patents with Simultaneous Innovations: The Patentability Requirements and the Direction of Innovation

37 Pages Posted: 7 Feb 2023 Last revised: 4 Aug 2023

See all articles by Fabio M. Manenti

Fabio M. Manenti

University of Padua - Department of Economics and Management

Luca Sandrini

Budapest University of Technology and Economics

Date Written: February 7, 2023

Abstract

We model a three-stage duopolistic game, in which firms first simultaneously choose the technological direction of their innovation, then invest in the chosen direction, and finally compete. Investments can be in overlapping or nonoverlapping technological territories, and their outcomes are uncertain. We show that compared to a regime where negligible innovations are patentable, strengthening the requirements for patentability can increase market efficiency. Importantly, we also show that the requirement level may affect the direction of firms' research and development trajectories. While in a mild patent regime firms tend to invest in overlapping technologies, stricter requirements may induce firms to operate in different technological areas, which increases social welfare and consumer surplus. We illustrate our general theory using two stylized Cournot competition models with process and product innovation.

Keywords: patents, R&D, patent requirements, direction of innovation

JEL Classification: L13, O31, O34

Suggested Citation

Manenti, Fabio M. and Sandrini, Luca, Patents with Simultaneous Innovations: The Patentability Requirements and the Direction of Innovation (February 7, 2023). Available at SSRN: https://ssrn.com/abstract=4350572 or http://dx.doi.org/10.2139/ssrn.4350572

Fabio M. Manenti (Contact Author)

University of Padua - Department of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy

Luca Sandrini

Budapest University of Technology and Economics ( email )

Budafoki ut 8.
Budapest, 1111
Hungary

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