The effect of patents on trade

In contrast with quotas and tariffs, it is theoretically ambiguous whether fewer (or ‘weaker’) rules over intellectual property rights will increase or decrease trade in patentable goods. The prevailing view is that anticipation of imitation reduces exporters' incentive to export goods to jurisdictions with ‘weak’ patent regimes. This empirical paper uses new measures of how the destination-country patent system can affect trade. In contrast with existing studies which assume would-be exporters can always get a patent in the target foreign market, we construct measures of the bias against foreign patent applicants and patents which may block imported goods. We find evidence that the presence of destination-country blocking patents has the larger (negative) impact on international trade. Being refused a patent also has a negative impact on trade but the magnitude is smaller.