Technological Leapfrogging and Strategic Patent Policy

In this paper, the term “strategic patent policy” refers to the case where examination of foreign firms’ patent applications may be deliberately manipulated by national patent offices so that domestic firms are protected and can leapfrog their foreign counterparts in technology in strategic sectors. However, it is not easy to distinguish the impacts of discriminatory patent policy from those due to liabilities of foreignness. Therefore, international intervention to eliminate discriminatory treatment becomes difficult. In this paper, we try to solve this conundrum by proposing a game-theory model to simulate the effect of strategic patent policy. The simulation results suggest that strategic patent policy measures are more likely to impede foreign patents that are (1) associated with R&D-intensive industries, (2) related to sectors where local firms’ absorptive capability is weak, and (3) registered in more countries. These hypotheses are then tested empirically by using patent databases of six major economies in the world. The empirical analysis provides evidence of possible existence of strategic patent policy against foreign companies in Japan and China, especially in high-technology and medium-high-technology industries.