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The Hidden Costs of Securing Innovation: The Manifold Impacts of Compulsory Invention Secrecy

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  • Daniel P. Gross

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract
One of the most commanding powers of the U.S. Patent and Trademark Office (USPTO) 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 In World War II, USPTO issued secrecy orders to more than 11,000 patent applications, which it rescinded en masse at the end of the war.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.

Suggested Citation

  • Daniel P. Gross, 2023. "The Hidden Costs of Securing Innovation: The Manifold Impacts of Compulsory Invention Secrecy," Management Science, INFORMS, vol. 69(4), pages 2318-2338, April.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:4:p:2318-2338
    DOI: 10.1287/mnsc.2022.4457
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    Cited by:

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    2. Dosi, Giovanni & Palagi, Elisa & Roventini, Andrea & Russo, Emanuele, 2023. "Do patents really foster innovation in the pharmaceutical sector? Results from an evolutionary, agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 564-589.
    3. de Rassenfosse, Gaétan & Pellegrino, Gabriele & Raiteri, Emilio, 2024. "Do patents enable disclosure? Evidence from the invention secrecy act," International Journal of Industrial Organization, Elsevier, vol. 92(C).
    4. Enrico Berkes & Peter Nencka, 2019. "‘Novel’ Ideas: The Effects of Carnegie Libraries on Innovative Activities," 2019 Meeting Papers 1315, Society for Economic Dynamics.
    5. Bernhard Ganglmair & Imke Reimers, 2019. "Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws," CRC TR 224 Discussion Paper Series crctr224_2019_119v1, University of Bonn and University of Mannheim, Germany.
    6. Enrico Berkes & Olivier Deschênes & Ruben Gaetani & Jeffrey Lin & Christopher Severen, 2020. "Lockdowns and Innovation: Evidence from the 1918 Flu Pandemic," Working Papers 20-46, Federal Reserve Bank of Philadelphia.
    7. Daniel P. Gross & Bhaven N. Sampat, 2023. "America, Jump-Started: World War II R&D and the Takeoff of the US Innovation System," American Economic Review, American Economic Association, vol. 113(12), pages 3323-3356, December.
    8. Donges, Alexander & Selgert, Felix, 2019. "The Consequences of Radical Patent-Regime Change," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203662, Verein für Socialpolitik / German Economic Association.
    9. Gross, Daniel P. & Sampat, Bhaven N., 2023. "The World War II crisis innovation model: What was it, and where does it apply?," Research Policy, Elsevier, vol. 52(9).
    10. Daniel P. Gross & Bhaven N. Sampat, 2022. "Crisis Innovation Policy from World War II to COVID-19," Entrepreneurship and Innovation Policy and the Economy, University of Chicago Press, vol. 1(1), pages 135-181.

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    More about this item

    Keywords

    compulsory secrecy; invention secrecy; national security; World War II;
    All these keywords.

    JEL classification:

    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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