Patent Breadth and Patenting of Intermediate Results in Cumulative Innovation Race

The paper discusses the effect of patent breadth an the patenting of intermediate results in a cumulative innovation race. Patent breadth is considered as the licensing rate between the patentee of basic innovation and the subsequent innovatiors. We show that both patent breadth and the strategic first mover advantage due holding the basic innovation secret determine the final market outcomes. Although increasing patent breadth always encourages public disclosure of intermediate results, the effect of patent breadth on social welfare and technological progress shows a quasi inverted U-shape and thus the optimal patent breadth is an innre solution, sharply different to the existing literature, where the optimal breadth is often corner solution.