David Hsu (Wharton), Scott Stern (Kellogg) and I have a new paper out this week on "The Impact of Uncertain Intellectual Property Rights on Markets for Ideas: Evidence from Patent Grant Delays." The paper assembles an interesting data set that allows us to relate the timing of patents being granted (as opposed to being filed) to the timing of licensing agreements (that is, transactions in markets for ideas).
We uncover two interesting facts: (1) that about 50 percent of licensing agreements are signed prior to a patent being granted and (2) that there is a 'spike' in licensing agreements around the time a patent is actually granted.
These two facts are interesting because efficiency would normally require licensing to occurs as early as possible. After all, if an innovation is available, better to put it to use sooner rather than later. The fact that many agreements occur after a patent is grant suggests that there are some frictions in ideas markets. The fact that agreements appear to occur soon after patents are granted suggests that patent grants alleviate those frictions.
By the way, our chief candidate for the latter effect is how having a patent (with much uncertainty regarding its scope of protection resolved) can improve the bargaining position of licensors and hence, their perceived return to searching for the best licensee or their incentives to cooperate with the licensee on transferring tacit knowledge down the track. For more on that, however, you can read the paper.