Patenting and Innovation
Technology Adoption
Trade Policy
Luther, Z. R. Patent policy in a model of technology transfer with knowledge spillovers. Open Access Link.
Abstract: Innovators have a higher propensity to patent their technologies in markets where they expect a greater likelihood of being granted patent approval (monopoly ownership) over their inventions. Policymakers thus have an incentive to provide strong patent rights to induce technology imports from abroad. However, governments also have an incentive to provide weak patent rights in order to (i) protect local consumers from paying proprietary markups for intellectual property, (ii) protect local innovators from competing with foreign patent-holders, and (iii) allow local producers to exploit knowledge spillovers from open-source technologies in the public domain. To determine how countries balance this trade-off when making their patent protection decisions, I present a multi-sector gravity model of international trade. A decomposition of the equilibrium effects of altering patent policies show that stronger patent rights will likely reduce a country’s real income, suggesting that the costs of patent protection to consumers and beneficiaries of knowledge spillovers outweigh the benefits to patent-holders. Quantifying the model using data on 9 million patent applications filed across 12 countries, I calculate the Nash and globally optimal patent policy vectors. In general, my counterfactual experiments show that patent rights are too strong: firms’ likelihoods of patent approval decrease by upward of 24 percentage points under counterfactual patent policy. Even though patent regimes are generally weakened for all firms, national planners seek to protect local firms' market power by making it easier for them to obtain patent approval relative to foreign rivals. In all, I estimate gains in national welfare of up to 2% between 2001-2014 under the optimal policy vectors.
Bond, Eric W., & Luther, Z. R. (2025). International patent families: When to apply. Review of International Economics, 33: 450-465. Open Access Link.
Abstract: We model the decision of an innovating firm on where and when to make cross-border patent applications given the rules of the Paris Convention and Patent Cooperation Treaty (PCT). We show that an innovating firm will have an incentive to apply at the beginning (end) of the Paris Convention application window when returns are front-loaded (back-loaded). The preliminary review provided by a PCT application expedites the review process in subsequent national applications, leading to the selection of firms with more productive innovations into the PCT route for cross-border applications. We also show that the PCT's preliminary application may be used to provide information on the patentability of an innovation. To provide empirical evidence on these predictions, we compare the patenting behavior of semiconductor applicants with those of pharmaceutical applicants, where the former has among the shortest times from innovation to market and the latter the longest. Consistent with the predictions of the model, we find that pharmaceutical applications are 15 percentage points likelier than semiconductor applications to be filed at the Paris deadline for national applications under the Paris convention. PCT applications for pharmaceuticals are 32 percentage points likelier to be filed at the Paris deadline. We also find that as many as 30% of PCT applications may result in information about patentability that makes subsequent applications unprofitable.
Luther, Z. R., Swinton, S. M., & Van Deynze, B. (2022). Potential Supply of Midwest Cropland For Conversion to In-Field Prairie Strips. Land Economics, 98(2): 274–291. Open Access Link.
Abstract: Prairie strips planted into crop fields offer multiple environmental benefits. This study estimates the willingness of U.S. farmers to convert 5% of their largest corn-soybean field to prairie strips in exchange for payment. Using stated preference results to estimate land supply, we find that 20% of farmers are willing to adopt prairie strips at payments equivalent to average Conservation Reserve Program rental rates, corresponding to potential conversion of 90,000 acres on 1.8 million acres of cropland. Farmers are likelier to adopt in smaller fields and when they perceive that prairie strips will benefit environmental quality or agricultural productivity.
Luther, Z. R., Swinton, S. M., & Van Deynze, B. (2020). What drives voluntary adoption of farming practices that can abate nutrient pollution?. Journal of Soil and Water Conservation, 75(5): 640-650. Open Access Link.
Abstract: Agricultural nutrient runoff and leaching into groundwater can impose societal costs that may be external to farmer decisions. Farmers can reduce the environmental impact of nutrient losses by adopting conservation and precision nutrient diagnostic and application practices. We examine the determinants of adoption decisions of such practices using mail survey data from a large, stratified sample of corn (Zea mays L.) and soybean (Glycine max [L.] Merr.) farmers in the US eastern Corn Belt. Via an ordered probit that captures both adoption and intent to adopt eight different practices, we evaluate a broad range of potential factors driving adoption of conservation and precision agriculture practices. We find that farmer objectives other than income, such as preferences for environmental amenities or social status, were important adoption drivers for conservation and precision technologies, respectively. Livestock farms had a distinct adoption profile, with greater likelihood to adopt cover cropping and less to adopt precision technologies. Farmers who participated in work- ing lands programs were more likely to adopt both cover cropping and precision soil testing technologies. Policies and messaging to encourage voluntary adoption of practices to reduce agricultural nutrient loss should account for farmer objectives, farming systems, and existing policy incentives.
Bond, E. W., & Luther, Z. R. Apply at the European Patent Office or in Germany?A Sorting Model of Patent Applications. Open Access Link
Abstract: We model the decision of an innovator on whether to apply for a patent at the European Patent Office (EPO), which can be validated at low cost in national markets if approved, or to apply to individual member country patent offices. We develop a model of heterogeneous inventions, where there is home bias in profitability of markets and an option value for a priority application. The option value arises due to learning about the quality of the invention during the patent window provided by the Paris Convention. The model predicts a sorting of higher-value innovations to the EPO and also provides competing explanations for the puzzling observations that many applicants apply to both. We test the predictions using data on patent families from PATSTAT. Using the number of markets an applicant files in outside the EPO’s jurisdiction as our ex-post measure of applicant productivity, we find that applicants with low productivities find it too costly to file a regional patent application. Applicants with a sufficiently high productivity to warrant a regional application file in 2.6 times as many markets outside the EPO relative to those applicants who only file at national patent offices inside the EPO, and the threshold for applying to the EPO is shown to decline as the costs of validating in national markets declines. The combination of home bias and an option value for priority applications is able to explain the choice of applicants to apply at both a national market and the EPO as well as the fact that accession to the EPO has little impact on the quality of applications from acceding country applicants to their national patent office. This explanation for dual applications is preferred to one based on an insurance motive.
Luther, Z. R. National treatment or national barriers? Evidence from international patent families. (Revise and resubmit, Scientometrics) Open Access Link Supplementary Appendix
Abstract: Using data on 20 million patent applications filed across 88 countries between 1990-2016, I demonstrate that foreign innovators secure weaker intellectual property rights in local markets compared to domestic innovators. Foreign-owned inventions are 8 percentage points less likely to be granted patent protection than domestic ones. Foreign patents that are approved take 7% longer to be granted, and locally-filed patent applications for foreign technologies are cited by domestic patent examiners at a 27% lower rate than applications associated with local inventions. Disparities are smaller when innovators file for patent protection in markets that are closer in geographical proximity, when they file in markets with similar legal institutions as their home country, and when they patent in countries that share close economic ties with their own. Disparities are larger when foreigners patent in the Global South. Gaps are largest after accounting for invention novelty, proximity, and other frictions possibly affecting an applicant's success when filing for protection abroad. All analyses are descriptive and non-causal in nature. However, the results provide suggestive evidence that the barriers faced by foreign innovators may also be associated with government incentives to protect local firms and consumers, in non-compliance with the World Trade Organization's "national treatment principle."