Patent System, Firm Patenting Strategy and Technology Progress

The patent system of the People’s Republic of China has only a history of about 30 years, yet it has/nundergone three major policy changes to keep up with the tremendous pace of economic and technological/nprogress in China. Once a country in which technological advance relies primarily on copying/nand imitating foreign innovations, China is gradually shifting towards a regime that emphasizes on/nstrong intellectual property and indigenous innovation. It is fascinating, therefore, to witness this transition./nIt is important to enhance my understanding of the patent regime as a mechanism to promote/ninnovation and the dissemination of knowledge, as is the purpose of the thesis./nBoth of the chapters in this dissertation focus on patent applicants’ preference for how quickly they/nwant their patent applications to be processed. This is nontrivial primarily due to heterogeneity in firm/ncharacteristics, nature of invention, market structure, technology backgrounds and many unobservable/nfactors. I propose two factors that partially determine an inventor’s preference for speed of patenting:/nthe inter-temporal value patents of their invention and the speed of technological progress./nThe first chapter investigates the heterogeneous inter-temporal patterns of inventions’ value flow/nand the associated applicants’ patenting strategies for a small set of United States patents. To measure/nthe characteristics of different inventions’ inter-temporal value flow, we exploit a policy lever provided/nby the Chinese government that allows patent applicants to freely choose between one patent/nprotection of short examination delay, short protection period and another patent protection of long/nexamination delay, long protection period. We find that the majority of applicants that favor the former/nprotection (short&shot) have Electronics and Mechanics inventions, whereas applicants that favor/nthe latter (long&long) are mostly within Pharmaceuticals and Drugs. We then exploit this variation/nin patent choices under the Chinese regime with applicants’ patenting strategies in the U.S., for identical/ninventions. The empirical results suggest the short&short Chinese patent holders have a strong/ntendency of pursuing early U.S. patent issuance whereas the long&long patent holders have a strong/ntendency of maintaining their U.S. patents for long periods. The results are robust with or without/ntechnology field fixed effects./nThe second chapter analyze the effect of faster technology development on firms patenting strategy./nUsing a dataset with information about patent applications in both China and the US, I find that/nfirms are willing to secure early patent grants when technology moves ahead faster. The conventional/nwisdom that a patent secures a flow of monopoly profits that depreciates at a constant speed over time/nis not consistent with my empirical findings. Faster technology progress shifts the profits towards the/nearly periods, making early grants more important. The empirical results suggest that a more flexible/npatent regime which offers options for speed is more efficient.

Advisor: Wright, Brian D