America Invents Act and Innovation Acquisition: A Race to Acquire Patents? 

Abstract

This study examines how America Invents Act (AIA), particularly its shift from a "first-to-invent" to a "first-inventor-to-file" priority rule, affects innovation acquisition. Using the Act as a quasi-natural experiment, we find innovative firms became more likely acquisition targets post-AIA. This increased demand is further evidenced by more frequent contested bids, longer deal completions, and higher bid premiums for innovative targets during that time. Acquirers of these targets subsequently reduced their own patenting, indicating a substitution effect between internal and external innovation. The findings reveal a more competitive and less cooperative patenting environment post-AIA, forcing firms to exit the market or acquire innovation through M&As.

Keywords: Leahy-Smith America Invents Act, AIA, Patent Priority Rule, Patent Race, Patent Acquisition, Innovation, Mergers and Acquisitions, Competition, Information Asymmetry