Amalia Yiannaka and Murray Fulton
The paper examines how an innovator’s ability to enforce her patent rights affects (and is affected by) her decision to patent her innovation and her patent breadth decision. Specifically, the paper shows that the innovator may find it optimal to patent her innovation even if litigation is not pursued in the event of patent imitation. The patent is valuable because it can be used to influence the entrant’s location decision in a way that is profitable for the incumbent. In addition to showing that a patent need not be legally enforced to be valuable, the paper shows that the lower is the entrant’s R&D cost, the smaller is the innovator’s incentive to patent her product. If patenting occurs, however, the lower is the R&D cost, the greater is the patent breadth that could be chosen without triggering imitation.