Disclosing patents' secrets

The patent system is built on a grand bargain: To gain exclusive rights to practice their inventions, inventors must disclose their proprietary knowledge publicly. Economists have studied incentive benefits of exclusivity while implicitly assuming that disclosure of know-how in patent applications is costly for inventors. Yet, apart from facilitating diffusion of knowledge, disclosing know-how in a patent may privately benefit inventors by deterring rivals' duplicative research and development (R&D), preempting competitors' efforts to patent similar technology, and reducing informational asymmetries between patentees and potential investors [supplementary materials (SM)]. Understanding to what extent disclosure is viewed as a cost or a benefit by patenting inventors provides insights into our complex patent system and allows better policy-making to advance the diffusion of technical knowledge.