Why does a firm's patent cite patent applications of other firms?

Abstract

A patent application, which is pending at a patent office for the grant of a patent, is different from a patent because it has neither exclusive rights nor protection on intellectual property (IP) rights. Though it seems that an application has no incentive to be cited, many firms cite other firm’s applications when their patent is granted. I suggest that citing applications could be a preemptive action for patent infringement litigation. After the cited application gets granted, a firm can defend its patent from the owner of the cited application and it would be more pronounced in the complex-product where allowance rates of applications are higher. This study is the first to examine empirically whether citing a patent application has an advantage over patent infringement litigation. It expands the range of strategic citation from patents to patent applications and provides new strategy regarding patent wars.