Do Stronger Patents Induce More Innovation? Evidence from the 1988 Japanese Patent Law Reforms

Does an expansion of patent scope induce more innovative effort by firms? We examine responses to the Japanese patent reforms of 1988. Interviews with practitioners and professional documents for patent agents suggest the reforms significantly expanded the scope of patent rights. However, econometric analysis using both Japanese and U.S. patent data on 307 Japanese firms finds no evidence of an increase in either R&D spending or innovative output which could be plausibly attributed to patent reform. The ordering of authors' names was determined by a coin toss. This project is part of the NBER project on Industrial Technology and Productivity, and we are grateful to the Alfred P. Sloan Foundation for its financial support of this project. Sakakibara gratefully acknowledges the financial support of the Center for International Business Education and Research at the UCLA Anderson Graduate School of Management. Branstetter thanks the Japan Foundation Center for Global Partnership for financial support. We would like to thank officials at the Japanese Patent Office, especially Masafumi Yamamoto and Shunichi Doi for detailed information on the Japanese patent system, Takao Oogiya for information on patenting by Japanese firms, and Yoshisue Tsunoda and Michiko Tanaka for their help in arranging interviews with Japanese companies. We are also grateful to the general managers of intellectual property departments at 10 major Japanese companies for sharing their insights. Akinori Yamaguchi and Tsuyoshi Kakita at the Japan Patent Information Organization provided us with detailed Japanese patent data. In addition, we would like to thank seminar participants, and anonymous referees for helpful discussions and comments. Branstetter wishes to thank Professor Yosuke Okada of Shinshu University for discussions which inspired this research project, and for providing valuable information about the evolution of the Japanese patent system. Kaoru Nabeshima, Heather Berry, and Tatsuo Ushijima provided excellent research assistance.