ogy or to legally manufacture and sell their products. In contrast to software, business methods, or biomedical inventions, however, innovation in semiconductors was already highly cumulative and subject to patent protection prior to the 1980s “pro-patent” shift in the United States.2 For example, over 20,000 U.S. patents had been issued on inventions pertaining to semiconductor devices and manufacturing processes by 1981 (USPTO, 1995). In contrast, few software or biotechnology-related patents had been awarded before 1980 in part because of the legal uncertainty over patentable subject matter in these emerging areas (see Graham and Mowery, 2003 on software; Merges, 1997 on biotechnology-related inventions). The extent to which changes in the U.S. patent landscape during the 1980s have altered patterns of cooperation and conflict over patented technologies in semiconductors remains unclear.

The semiconductor industry is also an important empirical context within which to examine the broader incentives generated by the patent system in cumulative technological settings. In surveys on appropriability conducted in 1983 and 1994, (the “Yale” and “Carnegie Mellon” surveys, respectively), R&D managers in semiconductors consistently report that patents are among the least effective mechanisms for appropriating returns to R&D investments (Levin et al., 1987; Cohen et al., 2000).3 Driven by a rapid pace of technological change and short product life cycles, semiconductor manufacturers tend to rely more heavily on lead time, secrecy, and manufacturing or design capabilities than patents to recoup investments in R&D.

However, in a recent study on patenting in semiconductors, Hall and Ziedonis (2001) find that the strengthening of patent protection in the United States in the 1980s had two divergent effects on dedicated U.S. semiconductor firms. On the


Throughout this chapter, the term “pro-patent” refers to a series of legal reforms and rulings discussed in the second section that tilted the judicial treatment of patents in the United States more in favor of the patentee (see Merges, 1997 and Jaffe, 2000 for a review of related studies and empirical evidence). It is important to point out, however, that this term does not imply that the patent regime was “strengthened” in the sense of awarding patents more selectively or ensuring that only the rights of “stronger” patents are upheld. In fact, Quillen and Webster (2001) find that the USPTO has screened out a remarkably low percentage of patent applications since the early 1980s (as little as 5-10 percent). Others emphasize that the Federal Circuit’s interpretation of the nonobviousness standard has effectively “lowered the bar” of patentability (see, e.g., Quillen, 1993 and Hunt, 1999) and, in doing so, has generated additional uncertainty in the enforcement process (as discussed by Lunney, 2001).


The 1994 Carnegie Mellon Survey on Industrial R&D in the U.S. Manufacturing Sector (Cohen et al., 2000) updated and extended the influential “Yale” survey conducted in 1983 (Levin et al., 1987). Respondents in both surveys were R&D lab managers in a variety of “focus industries.” Both surveys found that R&D managers in only a handful of industries, including pharmaceuticals, chemicals, and (more recently) biotechnology and medical devices, considered patents to be an effective mechanism by which to appropriate the returns to R&D. These results echo the findings of Scherer et al. (1959), Taylor and Silberston (1973), and Mansfield (1986). As discussed below, the Carnegie Mellon survey extends upon the Yale survey by asking questions on why firms seek patent protection.

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