Do patents shield disclosure or assure exclusivity when transacting technology?

Patents may assist trade in technology either by protecting buyers against the expropriation of the idea by third parties (the appropriation effect) or by enabling sellers to more frankly disclose the idea during the negotiation phase (the disclosure effect). We test for the presence of both these effects using quasiexperimental matching analysis on a novel dataset of 860 technology transaction negotiations. We identify the appropriation effect by comparing the probability of successful negotiations involving a granted patent with those involving a pending patent. Similarly, we identify the disclosure effect by comparing the probability of successful negotiations involving a pending patent with those involving no patent. We find evidence for the appropriation but not the disclosure effect: technology transaction negotiations involving a granted patent instead of a pending patent are 10 per cent more likely to be successfully completed (compared with an average completion rate of approximately 80 per cent). The authors have benefited from constructive comments from Sean Applegate, William Bird, Charlie Day, Rowan Gilmore, John Haisken-DeNew, Paul Jensen, John Kapeleris, Bruno Lambrecht, Di Nicol, Karen Sinclair, Russell Thomson, Andrew Toole and participants at the EPIP 2012 conference in Leuven, Belgium. Funding for this research comes from Intellectual Property Research Institute of Australia and the ARC LP0989343. Linkage partners were IP Australia, the Australian Institute for Commercialization, and Watermark Patent and Trademark Attorneys.