| Abstract: |
From the viewpoint of an innovator a patent is a tradeoff between the right to
exclude others from using the patented matter versus the requirement to
disclose it. Given the sequential nature of many innovations, patent induced
technology diffusion can spur technological progress. However, second
innovators face the risk of being sued for infringement of the original
patent. Incomplete patent protection reduces the risk of such infringement:
either a narrow 'leading breadth' of the patent or the intentional containment
of patent protection by a "research use" or "Bolar exemption" provide "safe
harbors" for second innovators. This paper investigates how incomplete patent
protection affects the propensity to patent of the initial inventor on the one
hand and overall innovation incentives on the other hand. We find that
incomplete patent protection can positively affect overall innovation
incentives while maintaining the advantageousness of patent protection over
secrecy. However, if second innovators face a very low risk of being punished
for patent infringement, the propensity to patent decreases. |