Papers & abstracts

The Impact Gap:  Has Chinese Science Caught up to the Frontier?
Fiona Murray (MIT) with Yasheng Huang (MIT) and Valerie Kuo 
In this paper we examine the gap in citations – the impact gap – for chinese science compared to scientific papers published by authored based in other nations, specifically the United States.  Through an examination of papers published in the leading journal Nature and its derivative journals – Nature Biotechnology, Nature Materials, Nature Methods etc. (we refer to these as Nature X) - we explore the lower citations of papers that have been through the same review process and yet systematically seem to have a lower impact.  In the period from 1980 – 2000 the impact gap was large.  In the past decade that gap seems to have been reduced – we explore the mechanisms behind this reduction that enables China’s place at the knowledge frontier.

China's IP Transition
Richard P. Suttmeier and Xiangkui Yao

David Abrams and R. Polk Wagner 
Even as we stand on the cusp of the broadest set of changes to the US Patent Law in two generations, virtually no empirical analysis has been conducted on the impact of the primary components of the proposed reforms. Until now. In this paper we investigate the expected effects on patenting behavior of the major change in the America Invents Act of 2011: a shift in the patent priority rules from the US’s traditional “first-to-invent” system to the dominant “first-to-file” system. This is a deeply controversial change: Opponents argue that first-to-file disadvantages small inventors and leads to lower quality patents. Those in favor emphasize administrative simplicity and the cost savings of first-to-file. While there has been some theoretical work on this topic, we use the Canadian experience with the same change the US is considering as a natural experiment to shed the first empirical light on the question. 

Our analysis uses a difference-in-difference framework to estimate the impact of the Canadian law change on small inventors. Using data on all patents granted by the Canadian Intellectual Property Office and the US Patent and Trademark Office, we find a significant drop in the fraction of patents granted to small inventors in Canada coincident with the implementation of first-to-file. We also find no measurable changes in patent quality. The results are robust to several different specification checks. While the net welfare impact that can be expected from a shift to first-to-file is unclear, our results do reveal that, contrary to the conventional wisdom, the rule change is not free — it is likely to result in reduced patenting behavior by individual inventors.

Untangling Searchable and Experiential Quality Responses to Counterfeits
Yi Qian (Northwestern University), Qiang Gong (Southwest Finance University of China), Yuxin Chen (Northwestern University)
In this paper, we untangle the searchable and experiential dimensions of quality responses to entry by counterfeiters in regions that have weak intellectual property rights. One of our key theoretical predictions is that entries by counterfeiters induce incumbents to upgrade the searchable quality (e.g. appearance) of their products more and improve the experiential quality (e.g. functionality) less, as compared to entries by generic products.  This prediction uncovers the nature of product differentiation and helps in analyzing the real-world innovation strategies employed by authentic firms in response to entries by counterfeit entities.

by James Bessen (BUSL) and Grid Thoma (Camerino)
Abstract: International comparisons of patent systems are essential to harmonization treaties and to
analyze economic growth. Yet these comparisons often rely on little but conventional wisdom. This
paper develops an empirical method to compare the economic strength and quality of patent systems by
using renewal analysis of matched patents in different countries (same patent family). Comparing
patents on the same inventions filed at the EPO for Germany and in the US, we find that the German
patents generate substantially greater market power than their US equivalents, especially for small
inventors. Also, the average US patent has relatively lower economic value (“quality”).

Chen, Xiangdong and Zhang Gupeng
This paper improves patent value model by introducing unexpired patents into the model. We estimate the value of invention patent of China and make a comparison over patents from U.S., Japan, and European patent owners. Patent value of China is much lower than that of U.S. and Europe. This reflects the gap of R&D productivity and quality between China and developed countries. The improved model can further reveal larger difference between different patent owner groups. On the other hand, patent forward value is generally a decreasing function of the age of patent. Hence it is highest when the patent is granted, and falls to zero at the age of expiration. The forward value reflects closely with the patent renewal information based value distribution, however, it may reveal value distribution in the longer time durations, and may serve as other form of the value distribution by unexpired patent.

Matthis De Saint-Georges and Bruno Van Pottelsberghe de la Potterie 
This paper presents a quality index for patent systems. The index is composed of nine operational design components that help shape the transparency of patent systems and affect the extent to which they comply with patentability conditions. Seven factors are related to rules and regulations (e.g., grace period, opposition process and continuation-inparts), while two factors measure patent offices’ resource allocation (i.e., workload per examiner and incentives). The index is computed for 32 national patent systems, it displays a high heterogeneity across countries. Cross-sectional quantitative analyses suggest that the demand for patent rights -or the propensity to patent- is lower in patent systems with a higher quality index, controlling for research efforts, patent fees and the "strength" of enforcement mechanisms.

Patent Subsidy and Patent Filing In China slides
Zhen Lei (Penn State), Zhen Sun and Brian Wright 
In order to improve patenting awareness and boost innovation, the central and local governments in China have implemented policies of various subsidies for patent applications. Almost all provinces have had some subsidy policies in place since around 2003, on top of which many cities have their own subsidies for patent applications. This study examines the effects of such subsidies on patent filing, in terms of both quantity and quality of patent applications. We study six neighboring cities in Jiangsu province, where one city, Zhangjiagang, increased the amount of subsidy per patent application in June 2006 but subsidies in the other cities remained unchanged. We implement a Dif-in-Dif strategy to examine the effects of the subsidy increase on patent filings by firms in Zhangjiagang, compared to those in the other five cities. We find a significant increase in the number of invention patent filings from Zhangjiagang after June 2006. Meanwhile the quality of patent applications from Zhangjiagang did not drop after the policy change, compared to those from the other cities. The results suggest that patent subsidies indeed encourage firms to file more applications, but not at the cost of lower quality.

Gary Jefferson (Brandeis) 

Dietmar Harhoff
Patent applicants face uncertainty regarding the value of their inventions. New market
and technology developments may lead applicants to withdraw the application without entering
examination if they are given sufficient time for doing so. A look at a cross-section
of national and regional patent systems shows that most systems are indeed deferred examination
systems which lead to a substantial reduction of examination workload. The
1989 and 1996 policy reforms at CIPO, the Canadian Intellectual Property Office, are
investigated to study the impact of deferred examination more closely. CIPO adopted a 7-
year deferment period in 1989 and went to a 5-year deferment system in 1996. The shortening
of the deferment period from 7 to 5 years led to an increase in examination workload
of 6.9%. A comparison of Canadian patent filings with USPTO and EPO equivalents
shows that CIPO filings with ”late” examination requests frequently have equivalents with
continuations at the USPTO or with divisional filings at the EPO. Each year of delay at
CIPO is associated with a 3 percentage point increase in the likelihood of continuation
activity at the USPTO. The results point to a possible double-dividend: deferred examination
reduces examination workload directly (by inducing some applicants to drop out
over time) and indirectly (by reducing incentives for filing divisionals or continuations).

Stuart Graham (USPTO and Georgia Tech)

Due to its fragmentation and the difficulty of collecting data, European patent litigation has rarely been investigated across the various nations in which it occurs. This paper overcomes this vacuum, analyzing a never-before available dataset on patent actions in seven European countries during 2000-2010. We observe striking differences in the likelihood of reaching a final decision in patent litigation across jurisdictions, with much larger relative frequencies of decisions in some countries (e.g., the Netherlands) than in others (e.g., the UK). Litigation intensities also vary widely across technological areas, although the split among the types of court action (e.g., patent validity versus infringement) tends to be more regular, regardless of field. The variability we find in incidence across technological fields suggests differences in the dynamics of patent enforcement across industries, possibly due to differential costs or higher asymmetries of information or stakes in the outcomes. The cross-country patterns we find also highlight institutional differences across countries, all of which drive the costs and incentives to use the various courts, and help confirm the fragmentation in European technology markets. This article thus adds evidence to the ongoing policy debate about the incidence of forum shopping in Europe, and the extent to which lower predictability and legal certainty may be affecting the returns to firms from engaging in technological innovation and entering markets across the continent.

Dietmar Harhoff (LMU Munich)
Patent Disclosure

Chinese utility model and invention patents 
Brian Wright (Berkeley) with Siway Cao 

Diffusion of New Drugs in the Post-TRIPs Era
Iain Cockburn (BU) with Ernst Berndt (MIT) and Nathan Blalock 
We examine the international diffusion of new drugs under the post-TRIPS intellectual property rights regime.  Even after controlling for drug characteristics and variation in national health expenditure, we find substantial differences across countries in the probability of a drug being commercially available, lowest in countries such as Brazil, China and India with historically weak patent protection. Notwithstanding obligations now in force under the TRIPS Agreement to provide patent protection for pharmaceutical products, sellers of new drugs are much less likely to have market exclusivity in these countries.  Conditional upon being launched, a drug is 5 to 25 times more likely to be generic/multisource in these countries than in, for example, Spain.

Margaret K. Kyle and Anita M. McGahan
This paper addresses the relationship between patent protection and investment in the development of new 
pharmaceutical treatments.  The TRIPS Agreement, which specifies minimum levels of intellectual property 
protection for countries in the World Trade Organization, has increased levels of patent protection around the 
world.  Since patents also have the potential to reduce access to treatments through higher prices, it is 
imperative to assess whether wider use of patents  has  led  to  off-setting benefits, such as research on diseases 
that particularly affect the poor. Using variation across countries in the timing of patent laws and the severity 
of disease, we test the hypothesis that increased patent protection results  in  greater drug development effort. 
We find that patent protection  in high income countries  is associated with increases in research and 
development (R&D) effort; in other words, patent protection works in high-income countries to induce R&D. 
However, the introduction of patents in developing countries has not been followed by greater  R&D 
investment  in  the  diseases  that  are  most  prevalent  there. Our results suggest that alternative mechanisms for 
inducing R&D  may  be  more  appropriate  than  patents  for the “neglected”  diseases that  are concentrated in 
low-income countries.

Bhaven Sampat
The 1995 Trade Related Intellectual Property Rights (TRIPs) agreement led to an 
upward harmonization of developing country patent standards towards those of 
the  developed world. Among other changes, TRIPs requires that developing 
countries allow for product patents in pharmaceuticals. Most theoretical and 
empirical work in economics tends to treat TRIPs as dichotomous---there is 
widespread perception that TRIPs flipped the patent switch from “off” to “on” in 
developing countries. But the interpretation, implementation, and 
operationalization of these laws also matter. Like many international agreements, 
TRIPs includes room for interpretation, and, in pharmaceuticals, flexibilities. This 
paper provides empirical data on the impacts of TRIPs in Indian pharmaceuticals. 
This is an interesting context both because of the unique role of the Indian 
generics industry in the provision of drugs to the developing world, and because 
India was active in exploiting TRIPs flexibilities. Most prominently, Indian patent 
laws limit patents on “incremental” innovations, which dominate drug patenting in 
the developed world. This  institutional innovation has been greeted with 
enthusiasm by some, but concern from others (including the U.S. pharmaceutical 
industry and USTR). This contrasts sharply with the  institutional imitation
argument: there are also concerns that these standards, however high, are not 
being implemented in practice, reflecting resource constraints and other 
pressures toward mimicry at the Indian Patent Office. Proponents of the 
institutional innovation and imitation views agree that, if nothing else, the welfare 
impacts of TRIPs in India will be determined by the extent to which India sticks to, 
or departs from, international patentability standards. In this paper I use novel 
data on Indian drug applications (and, in some analyses, a matched sample of 
“twin” applications filed at the European Patent Office, or EPO) to assess the 
institutional innovation versus institutional imitation hypotheses. I find some 
correlation of prosecution outcomes across countries, but also that India  is
different---with a much lower grant rate than the EPO. However, the main source 
of these differences cited in existing policy discussions----Section 3(d) of India's 
patent law, which limits patents on “incremental” pharmaceutical innovations----
has had very little effect on outcomes in India vis-à-vis the control sample.

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Lei  139k v. 2 Sep 30, 2011, 3:24 AM Jim Bessen

Abrams slides  1828k v. 3 Sep 26, 2011, 5:40 AM Jim Bessen
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Bessen and Thoma slides  908k v. 1 Sep 26, 2011, 5:36 AM Jim Bessen
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Chen  345k v. 2 Sep 27, 2011, 8:39 AM Jim Bessen
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Bessen and Thoma  232k v. 2 Mar 5, 2012, 5:48 AM Jim Bessen
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Harhoff   115k v. 2 Sep 30, 2011, 3:23 AM Jim Bessen
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Chen slides  774k v. 3 Sep 27, 2011, 8:39 AM Jim Bessen
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  848k v. 1 Sep 30, 2011, 3:21 AM Jim Bessen
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  737k v. 1 Apr 8, 2014, 9:06 AM Jim Bessen
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Kyle and McGahan  1101k v. 2 Sep 26, 2011, 5:39 AM Jim Bessen
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Murray  677k v. 2 Sep 25, 2011, 12:27 PM Jim Bessen
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Kyle and McGahan  1663k v. 2 Sep 26, 2011, 5:39 AM Jim Bessen
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Suttmeier  703k v. 2 Sep 26, 2011, 5:39 AM Jim Bessen