An economic analysis of deferred examination system: Evidence from a policy reform in Japan ¬リニ

a r t i c l e i n f o We investigate how a deferred patent examination system promotes ex-ante screening of patent applications, which reduces both the number of granted patents and the use of economic resources for examinations, without reducing the return from R&D. Based on a real option theory, we develop a model of examination request behaviors. Exploiting the responses of Japanese firms to recent policy reform, we find that the shortening of the allowable period for an examination request significantly increases both eventual and early requests, controlling for the blocking use of a pending patent application. This effect is stronger in technology areas with higher uncertainty. These results support the importance of uncertainty for an applicant and of ex-ante screening. Unlike the United States Patent and Trademark Office (USPTO), the Japan Patent Office (JPO) and the European Patent Office (EPO) only examine patent applications after receiving formal examination requests from applicants. In Japan, if such a request is not received within three years of the date of the application, the application is deemed withdrawn. Under the first-to-file system, an inventor has an incentive to file his patent application as soon as possible. Therefore, inventors apply for a patent on even such an invention that has significant uncertainty in patentability and in the probability of its commercialization. Examining all applications has two important economic costs. First, it increases significantly the number of patent grants. Such grants constrain third parties without increasing the ex-ante profit of an applicant from its R&D. Second, economic resources are used for more examinations. Under the recent environment of " patent explosions, " increasing patent applications place strains on the patent office, which can result in longer pendency periods and a higher probability of mistakes in grant decisions. A deferred examination or an examination request system provides an important mechanism reducing these social costs. It does so by providing patent applicants with more time to screen their inventions before requesting examinations. Such an arrangement is likely to be especially important when uncertainty in commercialization is high. In this regard, what ultimately matters for a firm in seeking patent protection is not the technical quality of an invention per se but the value of patenting such invention, which depends on a number of factors, including the availability of complementary assets. For many inventions, the resolution of uncertainty in the value of patenting can …