The Disclosure Function of Patents

Authors: Stuart Graham (Georgia Tech)

Abstract
Theoretically, the patent system has been justified on several different bases. Primarily, the awarding of patents is supported on the incentive rationale. While the field often speaks of the additional benefits that flow from the disclosure function of patenting, whether from cumulative innovation or a reduction in wasteful duplicative inventive effort, there have been few attempts to empirically validate such benefits. This paper presents preliminary analysis of the extent to which innovators rely on patent disclosures, and the characteristics of such innovators as well as the determinants of employing patent information in the innovating process. This study uses data from the 2008 Berkeley Patent Survey, administered to young US technology firms in the biotech, medical devices, IT hardware and software/Internet sectors. About 1,300 firms responded. Participants were asked whether they checked patent literature when innovating, and if so, at what point. The responses show that patent information is consulted, although the degree differs significantly between groups of respondents. Venture-backed firms consult such information more regularly, and in certain sectors—notably biotechnology and medical devices—show a greater reliance on patent information than others, particularly compared with software and Internet start-ups. Moreover, the results demonstrate that when firms consult patent literature, they tend to do so relatively early in the innovation process. While patent holders are more likely to check the literature, some firms that own no patents also reference patents.

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