Patents seek to trade the benefits of inventive monopoly with the social benefits of public disclosure. Most studies on patent systems focus on the benefits of exclusivity. This column analyzes the broader impact of patents on innovation, facilitating changes in patent publishing requirements in the United States in 1999. Accelerated patent publication over two years Future patent quotes increased by 15% compared to baseline, suggesting a significant impact on the spread of knowledge. This finding contradicts the historical argument that patent disclosure hinders innovation or does not disclose useful information.
The patent system is built on a great deal of bargaining: in exchange for exclusive rights to their inventions, the inventors have to reveal their ‘secret sauce’ to the public. Most patent studies consider the advantages and disadvantages of exclusivity, but we know very little about other aspects of bargaining (see et al. 2014 and Williams 2017 for an excellent survey of patent research). And what we know about patent disclosure is controversial. Some studies have shown that the ease of publication creates significant knowledge flows to inventors (e.g. Hegde and Luo 2018, Furman et al. 2021) and across the country (e.g. Eugster et al. 2019, Smeets and de Val 2011), while others argue that ” Patent releases play a negligible role in promoting effective R&D spillovers ”(Roin 2005).
It is challenging to reliably measure the impact of patent publishing on innovation and economic growth. In the United States, for example, patent publishing has historically coincided with patent grants, making it difficult to distinguish their distinct effects on follow-on inventions. Nevertheless, anecdotal evidence suggests that the information published in the patent is important for technological advancement. Thomas Edison’s Light Bulb Patent (USPTO Patent # 223,898) revealed to the world a unique method for creating incandescent filaments – which Edison famously reached after trying over two thousand different filament materials. This revelation has paved the way for further innovation in electric lighting by others. One wonders how many more years it would have taken for Edison to spread electric lighting technology if it had kept its materials and methods secret.
In a recent study (Hegde et al. 2022), we separated the effects of patent disclosure on innovation by enacting the American Inventors Protection Act (AIPA) of 1999. AIPA is usually required to be published 18 months after filing the U.S. application Dates, in lieu of grants, accelerate the publication of innovations by an average of about two years (since 2000, an average of about 3.5 years from the filing of patent applications until approval). To ensure that our assumptions about the impact of patent disclosure are not tainted by fictitious effects (such as changes in economic conditions that also affect innovation and economic growth), we examine the impact of AIPA on U.S. applications with equivalent ‘twin’ applications in Europe that have always been European. Published in 18 months by the Patent Office (EPO). This identification technique allows us to estimate the marginal impact of patent disclosure through the U.S. Patent Office, compared to identical twins that are simultaneously published by the EPO, providing a lower limit for patent disclosure effects.
We measure the impact of AIPA on future patent quotes, a commonly used proxy for follow-on innovation, and innovators’ R&D activity. Figure 1 compares the forward citations of twin U.S. and European patents (cited by future inventors for focal patents) before and after AIPA (the vertical line of the AIPA’s legalization date). We measure forward citations within ten years of the patent being filed. We find that US patents, whose publishing timeline was accelerated almost 2 years after the AIPA, increased their forward citations by about 15% compared to European twins whose publication deadlines remained unchanged. It suggests that timely patent publication facilitates the spread of knowledge among patent inventors.
Figure 1 Comparison of U.S. patents and forward quotes for their European ‘twins’
We also find that the time it takes for a U.S. patent to receive their first forward quote is reduced by 25% after their European twin AIPA. Furthermore, the technical overlap between highly similar U.S. patents is reduced – thus, there is less duplication of concept when patent information is published more quickly. This result is consistent with the results of Luck et al. (2020) who see that fewer patents have been denied since AIPA to overlap with previous patents. We see that in addition to this, other more and more different patents are starting to overlap, suggesting that inventors in other fields are starting to draw on newly published information in patent publishing.
Turning to large, public firms in Compost, we see that the companies whose patent portfolios were most affected by AIPA have significantly increased their R&D, as shown in Figure 2. Thus, the firms that worked on the technology where the patent publications were accelerated the most were the ones that started to do more R&D. Just as inventors working in the electric light can accelerate their innovations by reading the patents of Thomas Edison, these companies innovate further to learn about recent related advances through patent publishing.
Figure 2 Log R&D for quintiles above and below AIPA exposure
Since its inception in 1802, the U.S. Patent Office has published more than 10 million such inventions under the assumption that such publications would facilitate the spread of technological knowledge. When AIPA was first proposed, 26 Nobel laureates opposed the publication of the initial patent, arguing that privacy would better protect inventors’ proprietary knowledge. The winners wrote a letter to the US Senate suggesting that expedited patent issuance would hinder the flow of new innovations (Modigliani 1999). We see that instead, patenting, R&D, and innovation have increased with the accelerated patent publication enacted by AIPA. This evidence also counteracts the claim that patents do not disclose useful information, an opinion commonly held by legal scholars (e.g. Roin 2005, Menell and Meurer 2013). If anything, these reforms have increased the flow of knowledge from leaders to followers, suggesting that patenting organizations are less likely to drive the slow spread of knowledge (such as Exit 2019). Our inquiries also provide an empirical basis for challenging recently proposed U.S. law to restrict pre-grant patent publications (e.g. HR5980).
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