Pre-Grant Patent Publication, R&D, and Welfare * By Reiko Aoki ** and Yossi Spiegel *** May 24, 2003 Abstract: In Europe and in Japan, patent applications are automatically published at 18 months from the filing date regardless of whether a patent has been or will ever be granted. In the U.S., applicants who file for a patent only in the U.S. can choose to keep their applications confidential until a patent is actually granted. We examine the consequences of this difference in patent disclosure rules in a setting where patent protection is imperfect in the sense that patent applications may be rejected and patents are not always upheld in court. We show that pre-grant publication of patents leads to fewer applications and fewer inventions, but for a given number of inventions, it raises the probability that new technologies will reach the product market and thereby enhances consumers’ surplus and possibly total welfare as well. JEL Classification numbers: O34, O31 Keywords: R&D, inventions, patents, patenting decision, patent protection, pre-grant patent publication, consumers’ surplus, social welfare * An earlier version of this paper was circulated under the title "Public Disclosure of Patent Applications, R&D, and Welfare" (Foerder Institute working paper No. 30-98). For their comments on the earlier version of the paper we thank Omri Ben-Shahar, Bruno Cassiman, Claude Crampes, Richard Gilbert, Rob Masson, John Panzar, Pierre Regibeau, Manuel Trajtenberg, and seminar participants in Academia Scinica, Ben-Gurion University, Northwestern University, Rutgers University, Tamkang University, Tel Aviv University, Tilburg University, Universite de Toulouse, University of Auckland, the 1997 EARIE meetings in Leuvan, the 1997 ASSET meetings in Marseille, the 1998 EEA meetings in Berlin, and the 2000 World Congress of the Econometric Society in Seattle. ** Institute of Economic Research, Hitotsubashi University, Japan and Department of Economics, University of Auckland, New Zealand. Email: aokirei@ier.hit-u.ac.jp *** Recanati Graduate School of Business Administration, Tel Aviv University, Ramat Aviv, Tel Aviv, 69978, Israel. Email: spiegel@post.tau.ac.il, http://www.tau.ac.il/~spiegel.