In the Interest of Full Disclosure: Consequences of the Grand Bargain in Patenting

Abstract

We consider a model where an innovator chooses how much to disclose about their invention before Cournot competing. More disclosure lets the follower copy more, but also signals strength and increases the innovator's probability of winning an infringement suit. We find policies that increase damages due to copying lead to universally more disclosure, while policies that increase winning probabilities induce less disclosure from large inventions and more from small inventions. We validate our predictions using two court decisions; one increased damages, the other winning probabilities. We conclude that some pro-patent policies are counterproductive, reducing disclosure for the largest inventions.