‘Protection’ of ‘patents’ is strictly defined by the breadth of its scope, the legal coverage a patent provides.

This paper provides two tools for patent scholars to help them study patents and their value. The first is a measure of patent scope, the extent of the legal coverage that a patent provides. The second is an econometric instrument, a measure of a patent examiner’s scope toughness on the extent of scope given to a patent, which allows for causal inference on the effect of getting more or less patent scope.

To ensure that our measures are capturing the phenomena that we intend, we ground them in (i) the details of patent law, (ii) the rules of the U.S. Patent and Trademark Office (USPTO), and (iii) the practice of attorneys prosecuting patents. We also do extensive validation work to show that our measures accord with the views of practitioner experts and with the observed behavior of patent filers. Next, we compare our measure with other approaches for measuring patent scope suggested in the literature. Finally, we provide an example of how our instrument can be used, showing that patents with (exogenously) narrower scope are less likely to be declared standards-essential.

Patents are valuable because of what they protect. If they can exclude competitors from a valuable market or from important technologies, they can generate greater profit margins or faster growth for the patent holder, becoming extremely valuable. In contrast, if they cannot restrict competitors, their value can be negligible. The enormous range of patent values can be seen in Figure 1, based on a survey of patent holders by Gambardella, Harhoff, and Verspagen (2008).

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The ability of a patent to exclude others arises from a particular part of a patent: the claims. “Patent claims define the scope of patent protection. Whether a claim covers a product accused of infringement frequently determines whether a patent holder will be rewarded or left with nothing." (DiPietrantonio, 2011). If those claims are to be valuable then they must be sufficiently broad – that is, they must not only stop a competitor from directly copying the invention but also prevent that competitor from producing a readily substitutable variation of the invention. For example, a patent on an engine would be worth little if a competitor could escape that protection by making the same engine in a different color. Patent attorney Thomas Kulaga explains: “Broad patents typically offer more protection against infringers than a narrow patent” because they are “oftentimes very hard to design around”. (Kulaga).

We show that the breadth of a patent’s scope can be measured by counting the number of words in its first claim2, with more words corresponding to less scope.3 This relationship holds because a competitor’s offering must meet every condition of a claim in order to infringe it, so a longer claim implies more conditions that must be met for a patent to be violated. For example, a patent on an “engine” would be broader than a patent on a “car engine” and both would be broader than a patent on a “200 horsepower car engine.” This correspondence between claim length and patent scope is widely acknowledged by practitioners, who report that “longer claims are necessarily more narrow.” (Quinn, 2015)

Ours is not the first attempt to measure patent scope. Common alternatives have included (1) the number of patent classes to which a patent is assigned, (2) the number of citations from future patents to that one, and (3) the number of claims listed on the patent. We test our measure, and these alternatives, against the judgment of patent attorneys as to the scope of patent coverage. We find that our measure is highly predictive (p < 0.001) and explains nearly half of all the variation in patent scope, as judged by experts. In contrast, we find that the number of patent classes assigned to a patent is negatively correlated with patent scope, the reverse of what is typically assumed. We find that the number of citations to a patent is only incredibly weakly (and statistically insignificantly) related to patent scope, and that in practice it only explains 0.04% of the variance in patent scope, as judged by experts. We do find that the number of claims in a patent is predictive of patent scope, but that this relationship is much weaker than that of our measure and only explains 7% of the variation in patent scope. From these findings we conclude that our measure is highly predictive of patent scope, and that traditional measures are either misleading or lack explanatory power.