An Autopsy on Submarine Patents

A “submarine patent” is one whose issuance and publication has been intentionally delayed by its inventor with the hope that firms will independently discover and come to rely on a similar innovation at some later time, at which point the inventor causes his patent to issue and claims infringement. Although submarine patents are harmful to an innovation-led economy, previous research has struggled with how to discriminate between these subversive patents and patents whose issuance was delayed for legitimate reasons. I propose a novel identification strategy that exploits self-sorting by inventors around a 1995 policy change that was unfavorable to submarine patents. Using a regression-discontinuity design, I find that submarine patents are on average much more likely to be asserted for infringement in court cases. In addition, I conclude that submarines were more common in certain industries than others as evidenced by differential responses of industries to the policy change. Finally, I show that the failure of submarine patents within specific industries to ultimately assert infringement seems to be an indicator of which industries in the world economy experienced shifts in technological paradigms during this time, providing an additional method to asses the determinants of differences in income per capita across countries. I also describe how this result can be generalized across timeperiods.