There is considerable evidence that holding a patent in a foreign country can help a firm export to that country. But new evidence from Swinburne University and University of Melbourne, presented at the European Policy for Intellectual Property (EPIP 2015) conference in Glasgow, organized by CREATe (Research Councils UK Copyright Centre), has found that patents can also block would-be exporters.Using a large international dataset, the researchers found that getting an adverse report from a foreign patent office made businesses hesitant to export their goods to that country. Researchers thought this was because businesses were fearful that the adverse report meant they would be hit with a patent infringement suit if they exported. The impact of these adverse reports was 6 times greater in high-tech industries such as aerospace, computers and office machinery, electronics-communications, pharmaceuticals, scientific instruments than low-tech industries such as printing, textiles, clothing, food and beverages.

Not all adverse reports from the foreign patent office affected exports. If the report cited blocking patents from a third country, it did not reduce exports.

The economic modelling also showed that would-be exporters who apply for but are refused a patent in foreign countries are discouraged from exporting. This effect was found even when the quality and value of the underlying invention was accounted for. It is possible that a business may hold a patent over an invention in one country but not another because all patent offices have some discretion over whether or not to grant an application. This patchwork pattern of patents gives rise to an ad hoc selling strategy. Businesses will sell into some markets where their patent enables them to recoup their costs of transport, marketing and post-production services; but in other markets, where they have had their patent application refused, they are not able to command the prices needed to cover these selling costs.

Much debate over the role of patents in international trade considers what the patent system should do. By contrast, in this study the researchers consider what the patent system actually does do – warts and all.

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Notes for editors: ‘The effect of patents on trade’ by Paul Jensen, Alfons Palangkaraya and Beth Webster is a paper presented at the European Policy for Intellectual Property (EPIP) Conference, University of Glasgow, 2-3 September 2015.  For more information visit: http://www.epip2015.org/
Paul Jensen is Professorial Research Fellow, Melbourne Institute of Applied Economic and Social Research, University of Melbourne
Alfons Palangkaraya is Associate Professor, Centre for Transformative Innovation, Swinburne University of TechnologyProfessor Beth Webster is Director, Centre for Transformative Innovation, Swinburne University of Technology, AustraliaFor further information contact Beth Webster on +61 439 953 497. (email: emwebster@swin.edu.au) or the CREATe PR team (email: contact@create.ac.uk)

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