The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979-1995

This paper examines the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation. Recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate the returns to R&D, despite the strengthening of US patent rights in the early 1980s. Yet the propensity of semiconductor firms to patent has risen dramatically over the same period. This paper explores this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of approximately 100 US semiconductor firms during a period that spans the “pro-patent ” shift in the US legal environment. The results suggest that the strengthening of US patent rights spawned “patent portfolio races ” among capital-intensive firms, but also may have facilitated entry by specialized design firms during this period.