Product Development and the Timing of Information Disclosure under U.S. and Japanese Patent Systems

This paper examines the consequences of the differences in the timing of information disclosure between the U.S. and Japanese patent systems. Under the Japanese system it is possible for a firm to apply for a patent knowing the exact specifications of a rival's patent application. In contrast, in the U.S. the only way a firm learns about a rival's innovation is upon the actual granting of the rival's patent. We argue that this difference enables Japanese firms to coordinate their R&D efforts better than their U.S. counterparts and that this, in turn, leads to smaller quality improvements under the Japanese system. We show that the creation/diffusion tradeoff of patents can be influenced not only by the scope and length of patent protection but also by other features of the patenting process.