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


  • Alberto Galasso
  • Mark Schankerman


We study how fragmentation of patent rights ('patent thickets') and the formation of theCourt of Appeal for the Federal Circuit (CAFC) affected the duration of patent disputes, andthus the speed of technology diffusion through licensing. We develop a model of patentlitigation which predicts faster settlement agreements when patent rights are fragmented andwhen there is less uncertainty about court outcomes, as was associated with the 'pro-patentshift' of CAFC. The model also predicts that the impact of fragmentation on settlementduration should be smaller under CAFC. We confirm these predictions empirically using adataset that covers nearly all patent suits in U.S. federal district courts during the period1975-2000. Finally, we analyze how fragmentation affects total settlement delay, taking intoaccount both reduction in duration per dispute and the increase in the number of requiredpatent 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," STICERD - Economics of Industry Papers 46, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stieip:46

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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. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, Elsevier.
    3. Nikolaus Thumm & Garry Gabison, 2016. "Patent Assertion Entities in Europe: Their impact on innovation and knowledge transfer in ICT markets," JRC Working Papers JRC103321, Joint Research Centre (Seville site).

    More about this item


    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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