Embracing Invention Similarity for the Measurement of Vertically Overlapping Claims

Abstract

Clear and well-defined patent rights can incentivize innovation by granting monopoly rights to the inventor for a limited period of time in exchange for public disclosure of the invention. However, when a product draws from intellectual property held across multiple firms (including fragmented intellectual property or patent thickets), contracting failures may lead to suboptimal economic outcomes (Shapiro 2000). However, an alternative theory, developed by a variety of scholars, contends that patent thickets have a more ambiguous effect (Galasso and Schankerman 2010; Spulber 2017). Researchers have developed several measures to gauge the extent and impact of complexity and the various channels of patent thickets. This paper surveys that literature, and contends that mis-measurement may contribute to the incoherence and overall lack of consensus on patent thickets (Egan and Teece 2015). Specifically, the literature is missing a precise measure of vertically overlapping claims. We propose a new measure of vertically overlapping claims that incorporates invention similarity to more precisely identify inventive overlap. The measure defined in this paper will enable more accurate measurement, and allow for novel economic research on technological complexity, fragmentation in intellectual property, and patent thickets within and across all patent jurisdictions.