Strategic Value and Disclosure of Pending Patents

In many patent systems, the existence and contents of patent applications are unknown to third parties until the application is published by the patent office at least 18 months after the initial filing. The patent applicant can expedite this public awareness by disclosing the application before its automatic publication. We treat disclosure of a "pending patent" as a strategic decision.  In our model the applicant balances a negative effects of disclosure on its informational advantage with a positive effects stemming from potential deterrence of a rival's R&D. We give conditions under which disclosure deters rival innovate and show that, in equilibrium, an applicant discloses the pending patent and foregoes short-term benefits from its informational advantage in exchange for long-term benefits arising from deterring R&D when the patent is likely to be granted and the rival's R&D is unlikely to infringe on the applicant's patent. We provide partial empirical support for these findings.