Do patent pledges accelerate innovation?

Abstract

This paper estimates the effect of patent pledges, commitments made voluntarily by patent holders to limit the enforcement of their patents, on follow-on inventions. Patent pledges have been gaining popularity in recent years thanks to the highly visible pledges of companies such as Google and Tesla. Nascent literature discusses the legal and strategic implications of patent pledges, but we know very little about the societal aspects of such pledges. The empirical analysis exploits original data on more than 1,200 patents pledged from across technological fields between 2005 and 2017. We implement recent advances in conditional difference-in-differences estimators for staggered, dynamic event study settings to account for unobserved endogenous selection. We build the matched control group based on similarity measures of the full text of patent documents. The results suggest that patent pledges spur technological progress as reflected by increased citations received by the pledged patents, especially for high-quality pledged patents. The effect, however, appears to be much more limited for software patent pledges, perhaps because they often come with more restrictive use conditions. The results bear implications for discussions about competition policy and the role of intellectual property on technology diffusion.