Deepak Hegde

What is the Probability of Receiving a U.S. Patent

What proportion of patent applications filed at the U.S. Patent and Trademark Office (USPTO) are eventually granted? Many experts have suggested that the USPTO approves nearly all applications, blaming this apparent leniency for many problems with the U.S. patent system. To test this assumption, we follow the prosecution histories of 2.15 million U.S. patent applications from 1996 to mid-2013. We find that only 55.8% of the applications emerged as patents without using continuation procedures to create related applications. The allowance rate decreased substantially over time, particularly for applications in the “Drugs and Medical Instruments” and “Computers and Communications” fields. Furthermore, applications filed by small firms were less likely to emerge as patents than those filed by large firms. We discuss the mplications of our findings for inventors, policymakers, and legal scholars.

Public and Private Universities: Unequal Sources of Regional Innovation?

Public universities occupy a unique place in the R&D system of the United States because of their state-controlled missions, sources of funding, and administrative structures. State governments preferentially support public university research that benefits local industry to stimulate regional innovation-based economic development. This article hence examines the geographic distribution of university patent citations during the years 1975 to 2000 to test if public university research spillovers are more likely to be localized at the state level as compared to those of private universities. The author finds little evidence in support of this hypothesis but a positive association between the quality of academic research and localization of resulting spillovers. Public universities should emphasize research quality as a means of fulfilling their regional innovation commitments.

Political Influence behind the Veil of Peer Review: An Analysis of Public Biomedical Research Funding in the United States

The U.S. public biomedical research system is renowned for its peer review process that awards federal funds to meritorious research performers. Although congressional appropriators do not earmark federal funds for biomedical research performers, I argue that they support allocations for those research fields that are most likely to benefit performers in their constituencies. Such disguised transfers mitigate the reputational penalties to appropriators of interfering with a merit‐driven system. I use data on all peer‐reviewed grants by the National Institutes of Health during the years 1984–2003 and find that performers in the states of certain House Appropriations Committee members receive 5.9–10.3 percent more research funds than those at unrepresented institutions. The returns to representation are concentrated in state universities and small businesses. Members support funding for the projects of represented performers in fields in which they are relatively weak and counteract the distributive effect of the peer review process.

Debtor Rights, Credit Supply, and Innovation

Firms’ innovative activities can be sensitive to public policies that affect the availability of capital for risky projects. In this paper, we investigate the effects of regional and temporal variation in U.S. personal bankruptcy laws on firms’ innovative activities. We find bankruptcy laws that provide stronger debtor protection decrease the number of patents produced by small firms. Stronger debtor protection also decreases the average quality, and variance in quality, of firms’ patents. We find evidence that the negative effect of stronger debtor protection on experimentation and innovation may be due to the decreased availability of external finance in response to stronger debtor rights — an effect amplified in industries with a high dependence on external finance. Hence, while it is typically assumed that stronger debtor protection encourages innovation by reducing the cost of failure for innovators, we show that it can instead dampen innovative activities by tightening the availability of external finance to innovators.

Patent Publication and the Market for Ideas

In this paper, we study the effect of invention disclosure through patent publication on the market for ideas. We do so by analyzing the effects of the American Inventor’s Protection Act of 1999 (AIPA) — which required US patent applications to be published 18 months after their filing date rather than at patent grant — on the timing of licensing deals in the biomedical industry. We find that post-AIPA US patent applications are significantly more likely to be licensed before patent grant and shortly after 18- month publication. Licensing delays are reduced by about ten months, on average, after AIPA’s enactment. These findings suggest a hitherto unexplored benefit of the patent system: by requiring inventions to be published through a credible, standardized, and centralized repository, it mitigates information costs for buyers and sellers and, thus, facilitates transactions in the market for ideas.

The Bright Side of Patents

Motivated by concerns that the patent system is hindering innovation, particularly for small inventors, this study investigates the bright side of patents. We examine whether patents help startups grow and succeed using detailed micro data on all patent applications filed by startups at the U.S. Patent and Trademark Office (USPTO) since 2001 and approved or rejected before 2014. We leverage the fact that patent applications are assigned quasi-randomly to USPTO examiners and instrument for the probability that an application is approved with individual examiners’ historical approval rates. We find that patent approvals help startups create jobs, grow their sales, innovate, and reward their investors. Exogenous delays in the patent examination process significantly reduce firm growth, job creation, and innovation, even when a firm’s patent application is eventually approved. Our results suggest that patents act as a catalyst that sets startups on a growth path by facilitating their access to capital. Proposals for patent reform should consider these benefits of patents alongside their potential costs.

Do Inventors Value Secrecy in Patenting? Evidence from the American Inventor's Protection Act of 1999

This study examines the revealed preferences of inventors towards secrecy in patenting by analyzing their disclosure choices before and after the enactment of the American Inventor’s Protection Act (AIPA) of 1999. We find that about 7.5% of U.S. patent applications use AIPA’s provisions to keep their inventions secret before patent grant. Small U.S. inventors, in particular, are more likely than large corporations to prefer disclosure over secrecy for their most important inventions. Our findings question the conventional wisdom -- which seems to have shaped important policy -- that the disclosure of patent applications harms U.S. invention by increasing the risk of imitation for small inventors.

Funding and Performance at the US Patent and Trademark Office

Despite recent patent law reforms, the US Patent and Trademark Offices ability to deal with inefficiencies in patent examination will continue to rely on the annual Congressional appropriations process.

Unobserved Ability and Entrepreneurship

Why do individuals become entrepreneurs? When do they succeed? We develop a model in which individuals use pedigree (e.g., educational qualifications) as a signal to convince employers of their unobserved ability. However, this signal is imperfect, and individuals who correctly believe their ability is greater than their pedigree conveys to employers, choose entrepreneurship. Since ability, not pedigree, matters for productivity, entrepreneurs earn more than employees of the same pedigree. Our empirical analysis of two separate nationally representative longitudinal samples of individuals residing in the US and the UK supports the model’s predictions that (A) Entrepreneurs have higher ability than employees of the same pedigree, (B) Employees have better pedigree than entrepreneurs of the same ability, and (C) Entrepreneurs earn more, on average, than employees of the same pedigree, and their earnings display higher variance. We discuss the implications of our findings for entrepreneurship, education, and public policy.

Human Capital, Firm Capabilities, and Innovation

In this study, we empirically assess the contributions of inventors and firms for innovation using a 37-year panel of U.S. patenting activity. We estimate that inventors’ human capital is 5-10 times more important than firm capabilities for explaining the variance in inventor output. We then examine matching between inventors and firms and find highly talented inventors are attracted to firms that (i) have weak firm-specific invention capabilities, and (ii) employ other talented inventors. A theoretical model that incorporates worker preferences for inventive output rationalizes our empirical findings of negative assortative matching between inventors and firms, and positive assortative matching among inventors.