What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”

Abstract

We provide evidence on the value of patents to startups by leveraging the quasi‐random assignment of applications to examiners with different propensities to grant patents. Using unique data on all first‐time applications filed at the U.S. Patent Office since 2001, we find that startups that win the patent “lottery” by drawing lenient examiners have, on average, 55% higher employment growth and 80% higher sales growth five years later. Patent winners also pursue more, and higher quality, follow‐on innovation. Winning a first patent boosts a startup’s subsequent growth and innovation by facilitating access to funding from venture capitalists, banks, and public investors.

Crafting Intellectual Property Rights: Implications for Patent Assertion Entities, Litigation, and Innovation

“…First, the very large impact of patent examiners on patent outcomes (conditional on grant) is unexpected. While previous work documented variation in examiners' propensities to grant patents (Sampat and Williams 2015;Gaulé 2015;and Farre-Mensa, Hegde, and Ljungqvist 2017), we uncover the importance of the "intensive margin" of examiner effects (the crafting of patent rights, conditional on patent grant). This margin was not previously thought of as being of paramount importance for patent outcomes, as evidenced by (i) the fact that patent examiners are not very well paid, 9 (ii) the influential "rational ignorance" view of the patent office (Lemley 2000) that states there is little at stake in the patent examination process and that low-quality patents can be rationally ignored without significant consequences, and (iii) the focus of innovation research on the " macro-determinants" of the patent system, such as laws that establish a patent system or change the set of patentable subject matters.…”

“…We contribute to a growing literature (e.g., Sampat and Williams 2015;Gaulé 2015;and Farre-Mensa, Hegde, and Ljungqvist 2017) suggesting that patent applications can be treated as quasi-randomly allocated to examiners conditional on some covariates like application, year, and technology class. 3 Prior research has used examiner assignment to estimate the causal effects of obtaining a patent, as examiners differ in their grant rates.…”

Decentralising the Patent System

“…Further, recent changes to trade secret law and the emergence of third-parties specialising in DLT-based trade secret management have made early disclosure more feasible than ever-these developments are discussed in Appendix B. Firms can currently request early pre-grant publication in some jurisdictions, and the benefits of this early disclosure are particularly pertinent for small firms who do not have the resources to commercialise a promising invention. Patent applications, and patents themselves, are vital to the success of these firms as measures of their capabilities and can be used as a signal to investors (Lemley, 2000;Long, 2002;Hsu and Ziedonis, 2008;Veer and Jell, 2012;Häussler et al, 2012;de Rassenfosse, 2012;Conti et al, 2013;Hall, 2019;Farre-Mensa et al, 2019). Immediate disclosure would speed up these fundraising processes, including pregrant licensing (Hegde and Luo, 2017) and loans (Saidi and Zaldokas, 2017), and therefore the realisation of the public and private benefits stemming from these inventions.…”

The disciplinary effect of post-grant review – Causal evidence from European patent opposition

“…Invalidation in opposition could impact subsequent patenting for several reasons. First, losing a patent has been shown to adversely affect firm success, especially for small ventures (Wagner and Cockburn, 2010;Farre-Mensa et al, 2017;Gaule, 2018;Galasso and Schankerman, 2018). Second, inventors or their firms and patent attorneys may adjust their filing strategy.…”

“…Galasso and Schankerman (2018) use the random allocation of judges to committees deciding on the invalidation of patents to find that small firms decrease their inventive activity in response to an invalidation. Gaule (2018) and Farre-Mensa et al (2017) use prior examiner leniency and find that venture-capital backed start-ups fare substantially better when being granted a patent. 7 Implications of patent grants for firms' follow-on innovation, firm behavior, and firm success have thus been studied to some extent.…”