Patent Publication and Innovation

How does the publication of patents affect innovation? To answer this question, we exploit a large-scale natural experiment — the passage of the American Inventor's Protection Act (AIPA) — that accelerated the public disclosure of most patents in the U.S. by two years. After the passage of AIPA, patents receive more and faster follow-on citations, indicating significant technology diffusion. Technological overlap increases between distant but related patents and decreases between highly similar patents, and patent applications are less likely to be abandoned post-AIPA, suggesting a reduction in duplicative R&D. Firms exposed to longer patent grant delays increased their R&D investment more after AIPA. We estimate AIPA increased patenting by a significant 6.2 percent and increased firms' R&D investment by up to six percent. These findings are consistent with the predictions of our theoretical framework which models patent publication as provisioning current information about related technologies to inventors