This paper examines the patenting behavior of firms in the US semiconductor industry from 1979 to 1995, focusing on the paradoxical rise in patenting despite survey evidence suggesting that semiconductor firms do not heavily rely on patents to appropriate R&D returns. The authors explore this paradox through interviews with industry representatives and an analysis of patenting behavior in approximately 100 US semiconductor firms. They find that the strengthening of US patent rights in the early 1980s, particularly through the formation of the Court of Appeals for the Federal Circuit (CAFC), led to "patent portfolio races" among capital-intensive firms and facilitated entry by specialized design firms. The study also reveals that large-scale manufacturers increased their patenting significantly during this period, driven by a strategic response to reduce concerns about being held up by external patent owners and to negotiate better terms for accessing external technologies. Additionally, the emergence of specialized design firms, which entered the industry after 1982, contributed to the surge in patenting, as they relied more heavily on patents to secure proprietary rights in niche product markets. The results suggest that the shift in US patent policies had multifaceted effects on the patenting behavior of semiconductor firms, with capital-intensive firms and specialized design firms being particularly influenced by the strengthening of patent rights.This paper examines the patenting behavior of firms in the US semiconductor industry from 1979 to 1995, focusing on the paradoxical rise in patenting despite survey evidence suggesting that semiconductor firms do not heavily rely on patents to appropriate R&D returns. The authors explore this paradox through interviews with industry representatives and an analysis of patenting behavior in approximately 100 US semiconductor firms. They find that the strengthening of US patent rights in the early 1980s, particularly through the formation of the Court of Appeals for the Federal Circuit (CAFC), led to "patent portfolio races" among capital-intensive firms and facilitated entry by specialized design firms. The study also reveals that large-scale manufacturers increased their patenting significantly during this period, driven by a strategic response to reduce concerns about being held up by external patent owners and to negotiate better terms for accessing external technologies. Additionally, the emergence of specialized design firms, which entered the industry after 1982, contributed to the surge in patenting, as they relied more heavily on patents to secure proprietary rights in niche product markets. The results suggest that the shift in US patent policies had multifaceted effects on the patenting behavior of semiconductor firms, with capital-intensive firms and specialized design firms being particularly influenced by the strengthening of patent rights.