Question

Explain the concept of “breadth” of the patent. Economically, when should a patent be given a wide interpretation?

Answer 1

Breadth is the amount by which new innovations must differ from the existing patented product or process. In other words it is the minimum size of improvement that another investor (e.g. research group and the financiers behind them) has to make in order to obtain an independent (non-infringing) patent.

With a broad patent the original company has a wider economic moat for profits: it is harder to "invent around" the patent i.e. make slight modifications and claim it as original.

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Innovators should be given greater breadth or moat if the new technology is unprecedented and disruptive.

If not given adequate breadth then such technological progress will not be achieved because of the free-rider problem:

i) Innovator conducts research and incurs a (massive) fixed cost F
ii) Innovator sets price of product so that F can be recovered

The nature of intellectual property is such that it's difficult to innovate but easy to reverse-engineer,
implying that

iii) Other firms (aka the free riders) will create duplicates
iv) Free-riders didn't incur the massive fixed cost for original research, so they can price undercut the original innovating firm
v) Original innovating firm is left without sales
^ and so the firm that did the societally beneficial innovation is driven out of business.

Thus in the absence of suitable patent protection, the incentive to do original innovation vanishes.