Patent Height And Competition In Product Improvements

Theon van Dijk, MERIT, University of Limburg, Maastricht.

1/01/2005
(Original Publish Date: 1994)

The stringency of novelty requirements that patent offices and courts use in judging infringement issues and patentability of inventions defines the height of protection provided to a patent holder. In this paper the effects of patent height are studied in a duopoly wherefirms compete in product improvements. Minimal steps of improvements, determined by the height, limit the strategy space of competitors who want to invent around a patent. It is shown that low patents do not affect the natural market equilibrium. A patent holder can lose with medium patent heights, but he becomes a pure monopolist if patents are high. The non patent holder can gain with medium heights but is increasingly worse off with higher patents.