Does Patented Information Promote Progress?

Abstract

The strength of patents is often seen as their greatest weakness. Patents are said to represent a “tradeoff” between the benefits of public disclosure of new technical information and the burdens of private exclusivity over use of that information. The stronger the patent the greater the private benefit, potentially at the expense of society. And, when patents are too strong, they are seen as potentially “blocking” future technological progress, undermining society’s benefit of the bargain. The patent “tradeoff” and its attendant concerns currently take center stage in the debates over access to scientific research tools, patent thickets, and resource-draining patent litigation.This paper studies the patent “tradeoff” empirically and demonstrates that the private and social benefits of patents can work together, not in opposition. We exploit the statutory criteria of patent validity to analyze the impact that valid patents have on future technological progress. We find a significant positive relationship. By analyzing over 1500 U.S. patents held valid or invalid in courts, we show that valid patents give rise to more future inventions than invalid patents. This occurs during the full term of patent exclusivity, and it holds true for future developments made by third parties other than the patent owner. Crucially, we find that this effect hinges on the quantity and quality of the patent disclosure. Patents that are invalidated for lack of novelty have the weakest impact on future development, whereas patents which disclose more information tend to promote more future inventions and are more likely to be valid. Overall, we find a robust positive connection between information disclosure, patent validity, and future technological progress. This study provides direct empirical evidence of the fact that, and process by which, the public disclosure of patents spurs future technological progress. This informs concerns about patents blocking cumulative innovation. We demonstrate that, as a general rule, as the information content of a patent increases so do both its private value and the productive benefit to society. In so doing, we also introduce new metrics for analyzing the information content of issued patents, providing tools for future research.