In 1994, the U.S. Congress enacted a patent law reform that modified the term of protection from 17 years from the date of issuance to 20 years from the date of application. Based on U.S. data on patent filings, we find that for the vast majority of pending applications patent life increased. We subsequently investigate the economic impact of the reform on firms’ patenting behavior. The literature on the surge in patenting in the 1980s and 90s neglects the 1994 reform as a potential reason. Instead it attributes the surge in the 80s to the establishment of the Court of Appeals for the Federal Circuit and sees strategic patenting and improved R&D management by U.S. firms behind the increase in the 90s. We construct a theoretical model of innovation with heterogeneous ideas to separate the 1994 reform’s impact on patenting from the hypotheses outlined in the literature. On the basis of the theoretical analysis, we empirically assess the question on the impact of the reform? How significant is its influence compared to the alternative hypotheses of what is behind the surge? Based on a new data set from the European Patent Office (EPO) and additional information on the extent of the firms’ involvement in the U.S. market, we utilize a difference-in-differences approach to distinguish the hypotheses on what drives patenting behavior. This approach is also able to contribute to the debate on the different dimensions of patent protection: patent length vs. patent breadth. On the one hand, studies on patent renewals show that only a small fraction of patents are renewed over the complete term of protection, which implies that the impact of a change of patent length might be negligible. On the other hand, patent value is skewed towards this small fraction, so that it has a leveraged effect on profits from overall investment. Hence, our study also aims at answering the question: Does patent length matter for firms’ R&D behaviour?