Patent quality and patentability requirements: Evidence from the third amendment to the Chinese Patent Law

This paper provides novel empirical evidence that stricter patentability requirements improve patent quality based on a quasi-natural experiment-the third amendment to the Chinese Patent Law. The results from difference-in-differences estimation show invention patents meeting absolute novelty are more likely to be cited internationally, renewed, and invalidated less frequently than those with relative novelty. We identify three specific mechanisms through which the stricter patentability requirement exerts its impact on patent quality, including the screening-out effect, where stricter patent approval standards weed out low-quality applications during substantive examination, the self-selection effect, where stricter patentability requirements motivate applicants to select higher-quality inventions in response to the lower probability of patent approval, and the foreign-inflow effect, where the higher standards create more effective patent protection, which attracts more overseas applicants and higher-quality overseas technologies. These findings support the relationship between patentability standards and quality and have implications for patent law reforms in developing countries.