| Patents are one of the most powerful forms of intellectual property protection and have been used for the last 500 years as a mechanism to stimulate the production and enable the dissemination of technological knowledge. Patents enable innovators to capture innovation rents through the granting of exclusive rights on their innovations for a pre-specified time period. The degree of appropriability of innovation rents enabled by a patent is determined, to a large extent, by the scope/breadth of the patent protection. In general, broad patent protection relaxes short-run competition in a market but it also increases the likelihood of a patent challenge and/or invalidation.;Despite the recognition that patent breadth has a negative effect on the likelihood of a patent remaining valid after it is granted, the standard assumption in the economics literature is that innovators attempt to maximize the returns from an innovation by claiming the broadest scope of patent protection possible. However, given that patent breadth is routinely challenged, the question arises as to whether the innovator, in an attempt to maximize the returns from the innovation, will choose the maximum patent breadth possible.;The purpose of this dissertation is to examine the optimal patent breadth strategy that an innovator should employ when faced with the possibility that the patent breadth claimed will be challenged. Specifically, the study argues that innovators of drastic product or drastic process innovations will not always choose the maximum patent breadth possible. Instead, in an effort to earn the maximum possible rents from innovation, innovators will choose a patent breadth that is, in most cases, less than the maximum possible.;The dissertation uses a game theoretic approach to explicitly model the innovator's profit-maximizing patent breadth decision in two different situations---one in which the innovator has discovered a drastic product innovation and one in which the innovator has discovered a drastic process innovation. In both cases the innovator faces the possibility of infringement and/or a direct patent validity challenge.;The results of the game theoretic models are also used to develop the framework for an empirical model that could be used to examine the patenting behavior of innovators in different industries. (Abstract shortened by UMI.)... |
