Open disclosure using invention pledges:a case study of IBM

We study the nature and consequences of IBM’s invention pledge program, the largest of its kind in US history. Invention pledges involve the open disclosure of patentable inventions without seeking patent protection, unlike patent pledges for which firms waive patent rights after patenting. Competing theoretical views characterize invention pledges either as low-quality inventions with poor organizational fit or as patentable inventions pledged openly by firms with weak firm-specific patent rights and lead-time advantages. We test these theoretical claims using a novel method that compares the quality of subsequent patents citing IBM invention pledges with similar others. Citing IBM invention pledges is positively correlated with patent quality, inconsistent with theories of adverse selection. IBM patents cite its invention pledges on average two years before others, consistent with private benefits of open disclosure. Cited invention pledges spur follow-on innovation, further highlighting their social benefits. We discuss the generalizability of our results obtained using the sample of cited invention pledges to uncited invention pledges. Overall, our results highlight the tradeoffs firms face between knowledge protection and disclosure and generalize to a small number of other disclosing firms.