Limits to political capture: evidence from patent grants, disclosures, and litigation

Substantial evidence suggests that regulatory agencies in the U.S. can be captured by the politicians who oversee them. We provide novel evidence of a federal agency in which capture is limited: the United States Patent and Trademark Office. Although patent applications from politically connected firms are more likely to be approved despite being of lower ex-post quality, additional analyses suggest these outcomes are not indicative of capture. In particular, the disclosure quality of connected patents' legal claims increases through the review process, narrowing the scope of the patents and constraining the intellectual property rights. Furthermore, connected patents are no more likely than others to be litigated ex-post, suggesting these patent grants are not spurious. Our findings provide insights into how the design of a regulator can limit the benefits that accrue to politically connected firms.