Strategic Patenting: Evidence from Examination Request Systems

Peichun Wang, Ph.D. Student in Applied Economics, The Wharton School

Abstract: This project studies firms’ behaviors under a patent system where patent applications are only examined upon request within a certain period of time from the initial filing of the application. The research develops a model of patents with option values and heterogeneous qualities and show that in equilibrium, firms may file for an excessive amount of patent applications, many of which of low quality, for not only learning (the value of their innovations) but also strategic reasons (e.g. temporary monopoly powers, delaying competitors’ innovations). The study then exploits the cross-sectional and time series variation in the length of the request period and the qualities of patent applications (measured by request rates, grant rates, and forward citations), as well as the existence of second filings and duplicate applications in the EPO worldwide patent statistical database (PATSTAT), to identify firms’ strategic patenting behaviors. Lastly, combining other features such as patent protection time and renewal fee schedules, the study employs counterfactual analysis to shed light on the optimal patent system design.