Abstract This paper documents the importance of foreign patents for the technology transfer of inventions created in the laboratories of the U.S. federal agencies. First, we describe the patent portfolios of the 11 federal agencies with 98 percent of the research performed within the laboratories of all U.S. federal agencies. Second, we estimate the distributed lag function showing the effects on license revenue of an agency’s history of patent applications for inventions granted U.S. patents. The estimation shows that those effects depend on whether the agency also obtained foreign patent protection for its inventions. Third, we estimate a dynamic panel data model of license revenues as a function of the history of applications and granted patents. The evidence supports the view that an agency that obtains U.S. patents for its technologies but does not obtain foreign patent protection disadvantages the corporations that license the agency’s technologies and then face international competition from firms that copy those technologies and compete with lower costs because they do not incur full development costs or pay royalties for licensing the technologies. An increase in foreign patents would increase the willingness of companies to undertake the development costs necessary to have successful commercial products, and technology transfer—with more remuneration to U.S. taxpayers via license royalties—of inventions from the laboratories of U.S. federal agencies would increase.
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