International Patent Families: When to Apply

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.