Technology Protectionism and the Patent System: Evidence from China

Governments have strong incentives to allow their inventors to free ride on foreign technologies. They can achieve this result by discriminating against foreigners in the patent system—by refusing to grant foreigners a patent for their inventions. International patent law treaties forbid this practice, which may lower the global innovation incentives and may hurt international trade. Using data on half a million inventions submitted to the Chinese patent office, we find robust evidence of anti-foreign bias in the issuance of patents in ‘strategic’ technology areas. Foreigners are about fifty per cent more likely to be refused a strategic patent than locals.