On the grant rate of Patent Cooperation Treaty applications: Theory and evidence

Patent Cooperation Treaty (PCT) has become increasingly important for patent applications across countries. However, our understanding of how PCT works remains limited in the literature. This paper investigates the role of PCT in the grant rate theoretically and empirically. I show that the first-stage report from PCT applications can complement national phase examinations in a theoretical model. Thus, it is in a patent office's interest to set a higher grant rate to PCT than direct patent applications. Next, using patent-level data from the Canadian Intellectual Property Office (CIPO) during 2000-2008, I empirically verify that CIPO is more likely to grant patents to PCT than direct applications and foreign applicants are more likely to file PCT applications. This paper suggests that PCT applications have a high grant rate and a higher quality, which partly explains the increasing popularity of PCT.