Patents and Cumulative Innovation – Evidence from Post-Grant Patent Oppositions

Using large-scale data on opposition to patents at the European Patent Office (EPO), we investigate the causal effect of a patent’s invalidation on follow-on inventions. We introduce a new instrumental variable exploiting the participation or absence of the patent examiner in the opposition proceeding. According to our baseline model, patent invalidation leads to a highly significant and sizeable increase of forward citations. While this is in line with previous studies, disentangling the effect leads us to results that stand in contrast to parts of the literature. We find that the effects are most pronounced for patents in discrete technology areas and in areas where patent thickets are absent. Moreover, the effect is particularly strong for small patent holders facing small follow-on innovators. These results constitute a challenge to the established view that bargaining failure lies at the origin of the blocking effect.