The Hidden Costs of Securing Innovation: The Manifold Impacts of Compulsory Invention Secrecy
One of the U.S. Patent and Trademark Oﬃce’s (USPTO) most commanding powers is to compel inventions into secrecy, withholding patent rights and prohibiting disclosure, to prevent technology from leaking to foreign competitors. This paper studies the impacts of compulsory secrecy on ﬁrm invention and the wider innovation system. In World War II, USPTO issued secrecy orders to >11,000 patent applications, which it rescinded en masse at the end of the war. Compulsory secrecy caused implicated ﬁrms to shift their patenting away from treated classes, with eﬀects persisting through at least 1960. It also restricted commercialization and impeded follow-on innovation. Yet it appears it was eﬀective at keeping sensitive technology out of public view. The results provide insight into the eﬀectiveness of compulsory secrecy as a regulatory strategy and into the roles, and impacts, of formal intellectual property in the innovation system.
I thank Ashish Arora, Pierre Azoulay, Wes Cohen, Alberto Galasso, Shane Greenstein, Deepak Hegde, Jeﬀ Kuhn, Hong Luo, Fabian Waldinger, Martin Watzinger, numerous seminar and conference audiences, three very thoughtful referees, the Associate Editor, and Editor Toby Stuart for helpful comments. I am grateful to Alessandro Iaria, Carlo Schwarz, and Fabian Waldinger for sharing code and to Jeﬀ Kuhn for discussing the mechanics of semantic analysis. I also thank Hayley Pallan, Greg Saldutte, and Senan Hogan-Hennessy for outstanding research assistance, and Harvard Business School and the NBER Innovation Policy grant (2016) for ﬁnancial support. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
- Requiring that select patent applications not be published kept inventions out of enemy hands, but lowered the rate of follow-on...