Game Theory in Patenting
Sources: https://lawreview.uchicago.edu/publication/network-theory-patentability, https://ir.lawnet.fordham.edu/iplj/vol28/iss4/3/
This summer, I had the chance to intern at a tech startup selling a proprietary patent valuation algorithm and patent databases, and part of my work involved accruing a basic understanding of patent policy. Because of this, I had grown interested in the justifications behind patent approval guidelines in relation to network theory. The first article emphasizes the cardinal rule of patentability: novelty, which requires that the invention is significantly different from anything that came before, in order for the applicant to be granted a monopoly over the patent.
It appears that patent policy is grounded on a theory of innovation. To explain how we can model the theory of innovation, and thus explain why its framework is pivotal in this realm of policy, we can bring to mind a local bridge – by proof, it is always a ‘weak’ tie, but highly influential in the spread of information (as demonstrated by many prior studies mentioned in class). The short explanation for this is that, in within one’s social network, all nodes have access to the same information (hence, new information is scarce) and the nodes connected by a local bridge serve as a conduit through which information from one social network can quickly reach the other. The decision to push an innovation into the patent realm (accessible through strong ties) as opposed to keeping it in the public realm (accessible by weak ties and proliferated by local bridges) is also a matter of game theory. As in a Nash equilibrium, patent filers may play best response strategies to one another, that may not result in a socially optimal outcome (in this case, the amount of innovation).
To demonstrate a simplified Nash equilibrium of patent filing, there are two strategies here: choosing to copy an invention, or refraining from copying it. The best case scenario for a player would be to copy another’s invention, whilst having their own invention uncopied. The best response to this strategy by another player would then be to copy the other player. The caveat of this is that, if everyone has access to an invention pool and tries to reap the benefits from it (via copying), its value will tank due to loss of novelty. Someone will want to reap the benefits of that access, and as benefits get depleted, the best response by other players is to partake in the reaping as well.
If everyone restrains themselves a bit, then the value of that pool, as well as innovation, can be steadily sustained. However, players are unlikely to act in a socially optimal way, which is where patent policy comes in – by introducing the ‘nonobviousness’ rule, we have essentially closed down a ‘road network’ (or a new path(s) from point A, applying for a patent, to point B, having the patent approved) that would have impeded the speed of innovation (vague connection to Braess’ Paradox, if we assume that the measure of innovation is the number of new patents being filed).