Patent Boxes and the Success Rate of Patent Applications (Online event)

08  April 2021    4:00 pm CEST

Ronald B. Davies, University College Dublin

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Online event via Zoom - See dial-in link below


Dial-in link for this event:

The presentation is based on a paper co-authored with Ryan Hynes and Dieter F. Kogler.

Patent boxes significantly reduce the tax rate applied to income earned from a patent. Existing work finds that those reductions increase the number of patents. That said, not all patents are equally novel. In particular, the patent box encourages the submission of patents of marginal novelty, a selection effect that would reduce the average success rates of patents. At the same time, the increased return to patenting encourages additional effort in innovation development and application preparation, increasing success rates. While this predicts an ambiguous effect, by exploiting the time dimension of these responses, we are able to examine their relative size. Using data from applications to the European Patent Office from 1978 to 2017 and find that the introduction of a patent box increases the average success rate of applications from the large innovators who make up the majority of applications by 6.9 percentage points. This impact only materializes two years after a patent box takes effect, suggesting that improved research effort is the dominant response by rms.

The presentation, when available, will be posted online after the event.

Ron Davies has been a Professor of Economics at University College Dublin since 2008. After earning his Ph. D. at the Pennsylvania State University in 1999, he joined the University of Oregon faculty where he remained until relocating to Dublin where he is currently Head of the School of Economics. Specializing in trade and foreign direct investment, he has a particular focus on the tax and trade policies that affect globalization. This work has recently been published in The Review of Economics and Statistics, Journal of International Economics, Scandinavian Journal of Economics, and Canadian Journal of Economics. He is Editor-in-Chief of International Tax and Public Finance and an associate editor of Review of International Economics and Economic and Social Review. Recent grants include funding from the European Commission to study non-tariff barriers and from the European Patent Office to examine the linkages between international trade and innovation. In addition to his primary affiliation with UCD, Prof. Davies is a fellow with the Oxford University Centre for Business Taxation, the CES-Ifö, and a founder of the Society of International Trade Theory.

Keywords: Patent Box; Patents; Likelihood of Patent Grant

JEL classification: H2; O3.