International harmonization of the patent-issuing rules

- We investigate the impact of the America Invents Act (AIA).
- Scotchmer-Green (1990) with fixed R&D implies that the AIA expedites innovations.
- We endogenize R&D intensity and find the result reversed.
- We find the conditions for reversals and relate them to industry characteristics.

Using a dynamic model of patent races for two sequential innovations, Scotchmer & Green (1990) compared the effect on R&D incentives of the two patent-issuing rules, first-to-invent and first-to-file, and found first-to-file more conducive to R&D. We show that their result depends on their assumption of fixed innovation probabilities. When innovation probabilities are endogenous for the intermediate invention, their result can be reversed. Our analysis has the obvious implications on the evaluation of the Leahy-Smith America Invents Act (2011), whereby the U.S. switched from first-to-invent to first-to-file.