The Liability of Foreignness in International Patenting

Abstract

This study investigates the different effects of the 1982 reform of the U.S. patent judiciary systems on patent scope in foreign and American firms. We first develop a model of patent scope decision-making under litigation uncertainty. We hypothesize that although the 1982 patent reform increased the scope of patents on average, it unfavorably affected the patent scope of foreign firms that were legally less capable than American firms. Using the data of the 30 years around the U.S. patent reform, we found that foreign firms tended to file patents with much narrower scopes than those of American firms after the 1982 reform. This tendency was stronger in technologically interdependent, “complex” industries than in less interdependent, “discrete” industries. If foreign firms developed and patented new technologies locally in the U.S., however, the liability of foreignness in patenting disappeared.