Do patent pledges accelerate innovation?

Do patent pledges spur innovation in follow-on inventions?

Patent pledges are gaining traction as voluntary commitments by patent holders to reduce enforcement on their patents, suggesting a potential mechanism to enhance innovation and technology diffusion. Understanding their effectiveness could reveal vital insights into the relationship between intellectual property rights and innovation, especially in light of public health discussions triggered by recent events like the COVID-19 pandemic. If patent pledges do indeed promote innovation, they could serve as a critical tool for fostering technological progress across various industries, especially those facing high barriers to entry due to stringent patent enforcement.

Using a dataset of 1213 U.S. patents pledged between 2005 and 2017, we employed a conditional difference-in-differences methodology with matched control patents that were similar in text to those pledged. This empirical analysis aims to assess the impact of patent pledges on subsequent follow-on inventions, measured through citation rates of the pledged patents relative to their control counterparts. We used various econometric strategies to ensure robust estimates.

We found that patent pledges significantly increase citation rates, with a key finding being that pledged patents experience about 0.2 to 0.5 additional citations per year post-pledge compared to control patents. Furthermore, the treatment effect is amplified in cases of less restrictive pledges, while patents associated with litigators attract fewer follow-on citations. Importantly, higher-quality and more novel pledged patents are correlated with greater innovation in terms of follow-on citations.

• 1213 U.S. patents pledged between 2005 and 2017
• Match group of 8371 similar control patents based on text similarity.

• Control patents are sufficiently similar to pledged patents to isolate the effect of the pledging.
• The pledging decision is influenced by unobserved factors that do not correlate with the expected outcome, allowing for a valid counterfactual.
• There is a consistent linear relationship between pledging and the resulting citation increase over time.