International Patent Cooperation, Patent Prosecution Highway Agreements, and Export Product Quality

• Published date: 01 November 2023
• Author: Fan Duan,Yifei Li,Tenglong Zhong
• Date: 01 November 2023
• DOI: http://doi.org/10.1111/cwe.12499

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 111–133, Vol. 31, No. 6, 2023111

*Fan Duan, Post-doctoral Researcher, Institute of Economics, Chinese Academy of Social Sciences, China.

Email: xueyi3@126.com; Yifei Li (corresponding author), Associate Research Fellow, Journal of Management

World, Development Research Center of the State Council, China. Email: liyfphd@alu.ruc.edu.cn; Tenglong

Zhong, Associate Professor, School of International Trade and Economics, Central University of Finance and

Economics, China. Email: tenglong_zhong@126.com. Tenglong Zhong is grateful for the support from the

National Natural Science Foundation of China (No. 71903003), the National Social Science Fund of China

(No. 21CTJ015), the Strategic Economy and Civil-Military Integration Interdisciplinarity Program of Beijing

Universities Advanced Disciplines Initiative (No. GJJ2019163), and the Program for Innovation Research in

Central University of Finance and Economics.

International Patent Cooperation, Patent Prosecution

Highway Agreements, and Export Product Quality

Fan Duan, Yifei Li, Tenglong Zhong*

Abstract

This paper investigates how international cooperation for patent examination using Patent

Prosecution Highway (PPH) agreements has aff ected the quality of fi rms’ exports. Taking

the PPH agreements signed between China and the export destinations as a quasi-natural

experiment, we established a diff erence-in-diff erence-in-diff erences model. We found that

international cooperation for patent examination caused fi rms to increase export quality

to PPH partners in patent-intensive industries to a greater extent. This eff ect was more

profound among PPH partners with stronger intellectual property protection, diff erentiated

products and core products, and agreements along with the Patent Cooperation Treaty.

We also found that PPH agreements increased the number of Chinese patent applications

filed in PPH partners, patent applications by PPH partners in China, and the level of

innovation, all of which constitute the major channels through which export quality to

PPH partners increases. Our fi ndings demonstrate that international patent cooperation

has played an important role in promoting international trade quality.

Keywords: export product quality, international patent cooperation, intellectual property

protection, patent prosecution highway

JEL codes: F14, F42, L60

I. Introduction

Globalization has expanded the scale and scope of the cross-border fl ow of products.

Simultaneously, the number of cross-border patent applications has also increased.

Fan Duan et al. / 111–133, Vol. 31, No. 6, 2023

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

112

Patent offi ces in various countries/regions face serious patent examination backlogs. To

reduce this pressure, improve the effi ciency of patent examination, and accelerate the

transnational fl ow of patents, patent offi ces from diff erent countries/regions cooperate in

terms of patent examination by signing Patent Prosecution Highway (PPH) agreements

between two or more patent offi ces. Within the framework of such agreements, fi rms

can obtain patent authorization from PPH partners in a shorter time frame, at a lower

cost, and with higher pass probabilities than from non-PPH partners.

Patented inventions usually contain new technologies that optimize product

attributes, enhance the suitability of products for consumers, and help upgrade the

quality of products. However, only when these new technologies obtain effective

intellectual property protection (IPR) in export destinations can firms establish

monopoly competitiveness, enhance the market demand for products, and surpass

the quality of similar products. Strong IPR at export destinations enables firms to

improve the quality of export products (Song et al., 2021). However, few studies have

examined the impact of institutional arrangements for patent examination on exports.

Patent examination is a necessary prerequisite for technical inventions to obtain

patent protection. The patent examination institutions of the intellectual property

offices at export destinations directly affect the procedure, efficiency, and result of

patent examination. The speed of patent examination affects the speed of patent

authorization and timing of product quality upgrades. The authorization probability

of patent examination affects the quantity of patent authorizations and degree of

product quality upgrades. This paper conducts a quasi-natural experiment based on

the PPH agreements signed by China. We examined empirically whether international

cooperation for patent examination improved the quality of export products.

The first set of studies describes the impact of IPR on the quality of export

products. Ndubuisi (2019) found that strong IPR in exporting countries provided

comparative advantages for the quality of export products in research and development

(R&D)-intensive industries. Zhang and Yang (2016) investigated the impact of the

level of domestic IPR on the quality of export products and found that strong protection

improved the quality of export products by either increasing foreign direct investment

or improving R&D. Dong et al. (2022) proposed that higher levels of IPR in the cities

where fi rms were located improved the quality of export products by increasing R&D

investments, promoting the development of new products, and alleviating fi nancing

constraints; this effect was more prominent for innovation-intensive industries.

Song et al. (2021) found that strong IPR in exporting countries and export destinations

could improve the quality of export products, with domestic IPR having a greater

impact than protection in export destinations.