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Patent Thickets and the Market for Innovation: Evidence from Settlement of Patent Disputes

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  • Alberto Galasso
  • Mark Schankerman

Abstract

We study how fragmentation of patent rights ('patent thickets') and the formation of the Court of Appeal for the Federal Circuit (CAFC) affected the duration of patent disputes, and thus the speed of technology diffusion through licensing. We develop a model of patent litigation which predicts faster settlement agreements when patent rights are fragmented and when there is less uncertainty about court outcomes, as was associated with the 'pro-patent shift' of CAFC. The model also predicts that the impact of fragmentation on settlement duration should be smaller under CAFC. We confirm these predictions empirically using a dataset that covers nearly all patent suits in U.S. federal district courts during the period 1975-2000. Finally, we analyze how fragmentation affects total settlement delay, taking into account both reduction in duration per dispute and the increase in the number of required patent negotiations associated with patent thickets.

Suggested Citation

  • Alberto Galasso & Mark Schankerman, 2008. "Patent Thickets and the Market for Innovation: Evidence from Settlement of Patent Disputes," CEP Discussion Papers dp0889, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0889
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    References listed on IDEAS

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    1. Schankerman, Mark & Scotchmer, Suzanne, 2001. "Damages and Injunctions in Protecting Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 199-220, Spring.
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    Citations

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    Cited by:

    1. Shahid Yusuf & Kaoru Nabeshima, 2009. "Growth through Innovation : An Industrial Strategy for Shanghai," World Bank Other Operational Studies 18613, The World Bank.
    2. Bottazzi, Laura, 2009. "The role of venture capital in alleviating financial constraints of innovative firms," EIB Papers 9/2009, European Investment Bank, Economics Department.
    3. Iain M. Cockburn & Megan J. MacGarvie & Elisabeth Müller, 2010. "Patent thickets, licensing and innovative performance," Industrial and Corporate Change, Oxford University Press, vol. 19(3), pages 899-925, June.
    4. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    5. Darcy, Jacques & Krämer-Eis, Helmut & Guellec, Dominique & Debande, Olivier, 2009. "Financing technology transfer," EIB Papers 10/2009, European Investment Bank, Economics Department.
    6. Harhoff, Dietmar, 2009. "The role of patents and licenses in securing external finance for innovation," EIB Papers 11/2009, European Investment Bank, Economics Department.
    7. Bronwyn H. Hall, 2010. "The Financing of Innovative Firms," Review of Economics and Institutions, Università di Perugia.

    More about this item

    Keywords

    patents; anti-commons; patent thickets; litigation; settlement;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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