Applicant behaviour in patent examination request lags Alfons Palangkaraya a,b , Paul H. Jensen a,b , Elizabeth Webster a,b, ⁎ a Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, VIC 3010 Australia b Intellectual Property Research Institute of Australia (IPRIA), The University of Melbourne, VIC 3010 Australia abstract article info Article history: Received 29 November 2007 Received in revised form 7 August 2008 Accepted 14 August 2008 Available online 20 August 2008 Keywords: Patent examinations Patent pendency Investment uncertainty JEL classification: O31 O34 One component of the duration of pending patents – why applicants choose to delay the examination process – is modelled. We use a matched sample of 9597 patent applications to examine this issue. Controlling for differences between patent offices, we find evidence that applicants create investment uncertainty by delaying decisions to request patent examination. © 2008 Elsevier B.V. All rights reserved. 1. Introduction The patent system exists to stimulate inventive activity and mitigate the market failure associated with the expropriation of innovation profits. However, designing the rules of the patent examination process is complex and opportunities often arise for patent applicants to engage in rent-seeking behaviour and thus a loss of social welfare. An example is the rule currently in force in many patent offices which allows applicants to request examination of their application at some point after it has been initially filed. 1 Such a rule is typically justified on the grounds that it allows applicants time to claim the earliest possible priority date while permitting them some additional time to develop their invention. However, such extensions to the pendency period come at some social cost since it introduces uncertainty in the status of property rights, thereby potentially distorting rival firms' investment decisions (see Zeebroeck, 2007). In this paper, we examine why applicants choose to delay examination of their patent. In order to examine how a given applicant behaves with respect to a given underlying invention under different administrative rules, we use a matched sample of 9597 sets of non-PCT applications submitted to the USPTO, the EPO, the JPO and the APO with a single, common priority application. 2 We then model the duration of the examination request lag to determine whether lags are determined by the quality of the underlying invention after controlling for office protocols and rules and applicant behaviour. Other studies such as Popp et al. (2004), Harhoff and Wagner (2005) and Regibeau and Rockett (2007) have modelled examination duration at one patent office, but this is the first study of its kind to consider applicant effects across different patent offices. Moreover, these other studies do not account for the fact that the total patent pending period is a function of whether or not the applicant proceeds with a formal examination request and the subsequent duration of the examination itself. In this paper, we focus on the former issue – which we refer to as the “examination request lag”– although we note that applicants may also engage in rent- seeking behaviour once the examination has commenced. Our results indicate that the examination request lag is determined by applicant-specific behaviour variables and the quality of the application. Both have a significant effect on the length of the examination request lag and thus the time the applicant can claim possession over the research turf. 2. Background A pending patent creates uncertainty for all parties in a market. Of particular concern is that patent pendency may distort rival firms' Economics Letters 101 (2008) 243–245 ⁎ Author order is randomised. Corresponding author. Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, VIC 3010 Australia. Tel.: +61 3 8344 2114; fax: +61 3 8344 2111. E-mail address: e.webster@unimelb.edu.au (E. Webster). 1 At the European Patent Office (EPO), the Japanese Patent Office (JPO) and the Australian Patent Office (APO), patent applicants file an initial application and then request examination some time in the future (which may be up to 5 years after filing date). Only the United States Patent and Trademark Office (USPTO) initiates examination of the application without a request to do so (although applicants can pay a fee to defer examination). 2 The priority date is the year in which the first patent application of a ‘family’ was first lodged with a patent office. This application is subsequently referred to as the priority application. 0165-1765/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2008.08.014 Contents lists available at ScienceDirect Economics Letters journal homepage: www.elsevier.com/locate/econbase