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National surveys of R&D labs across the manufacturing sectors in the U.S. and Japan show that intraindustry R&D information spillovers are greater in Japan than in the U.S. and the appropriability of rents due to innovation less. As in prior studies, patents are reported to be relatively ineffective in protecting innovations in most industries in the U.S. Patents score, however, about as well as other appropriability mechanisms (e.g., lead time and use of complementary capabilities) in Japan, where no appropriability mechanism is particularly effective as compared to the U.S. Patents are also observed to play a more central role in diffusing information across rivals in Japan, and appear to be one of the key reasons for greater intraindustry R&D spillover there, suggesting that patent policy can significantly increase information flows and, in turn, R&D spillovers. Strategic uses of patents, particularly for negotiations, are more common in Japan than in the U.S. (where they are concentrated in the complex product industries). 1