Disclosure and Subsequent Innovation: Evidence from the Patent Depository Library Program

Abstract

How important is information disclosure through patents for subsequent innovation? Although disclosure is regarded as essential to the functioning of the patent system, legal scholars have expressed considerable skepticism about its value in practice. To adjudicate this issue, we examine the expansion of the USPTO Patent and Trademark Depository Library system between 1975 to 1997. Whereas the exclusion rights associated with patents are national in scope, the opening of these patent libraries during the pre-Internet era yielded regional variation in the costs to access the technical information (prior art) disclosed in patent documents. We find that after a patent library opens, local patenting increases by 17% relative to control regions that have Federal Depository Libraries. A number of additional analyses suggest that the disclosure of technical information in the patent documents is the mechanism underlying this boost in patenting: the response to patent libraries is significant and of important magnitude among young companies, library opening induces local inventors to cite more geographically distant and more technologically diverse prior art, and the library boost ceases to be present after the introduction of the Internet. We find that library opening is also associated with an increase in local business formation and job creation, which suggests that the impact of libraries is not limited to patenting outcomes. Taken together, our analyses provide evidence that the information disclosed in patent prior art plays an important role in supporting cumulative innovation.

Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws

“…This requirement is called enablement. While the quality of such disclosures has been called into question by legal scholars (Roin, 2005;Fromer, 2009), Furman et al (2018), for instance, document that the opening of patent libraries (during the pre-internet era) had a positive effect on patenting by local firms, and Hegde et al (2019) find that accelerated disclosure of patent applications (due to the AIPA) increased the rate and magnitude of knowledge diffusion.…”

“…We use these estimates to make inferences about the socially optimal strength of patents and trade secrets protection to encourage investment in initial innovation as well as to facilitate follow-on innovation. We model followon innovation consistent with stylized facts: more disclosure of technical information boosts follow-on innovation (Williams, 2013;Gross, 2019), patents on early ideas raise the costs of creating future ideas (Scotchmer, 1991;Heller and Eisenberg, 1998;Galasso and Schankerman, 2015), and the information disclosed in patents is useful and of sufficient quality (Furman et al, 2018;Hegde et al, 2019).…”

The Hidden Costs of Securing Innovation: The Manifold Impacts of Compulsory Invention Secrecy

“…2 With the exception of recent work on the effects of changes in the strength of trade secrecy laws on publiclylisted firms' R&D (Png 2017a) and the intensity of patenting in process versus product innovation (Ganglmair and Reimers 2019), there is little research on the impacts of invention secrecy beyond the private returns to the inventor choosing its IP strategy. This paper also connects to a growing literature on patents' disclosure function, which has examined the effects of increasing access to patent publications through the USPTO's Patent and Trademark Depository Library network (Furman et al 2018) and of recent policy changes which accelerated the publication of U.S. patent applications (e.g., Luo 2017). Although these papers detect positive effects on local patenting, patent citations, and licensing, these results are in tension with skepticism from legal scholars (e.g., Roin 2005, Fromer 2009, Devlin 2010, who point out that much of the information in patents is available through other sources, and that inventors and applicants are incentivized not only to obscure the specification of inventions in the patent, but also to avoid reading patents at all.…”

Do Patents Enable Disclosure? Evidence from the Invention Secrecy Act

“…A recent line of research has produced empirical evidence on the disclosure function of patents (or lack thereof) using quasi-experimental approaches. Furman et al (2018) exploit the openings of regional USPTO patent libraries from 1975 to 1997. They document a significant increase in local patenting once a library opens, and attribute this effect to the disclosure of technical information enabled by libraries.…”