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Patents Rights and Innovation by Small and Large Firms

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  • Mark Schankerman

Abstract

This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.

Suggested Citation

  • Mark Schankerman, 2015. "Patents Rights and Innovation by Small and Large Firms," STICERD - Economics of Industry Papers 54, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:54
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    Cited by:

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    2. Talia Bar & Brendan Costello, 2017. "Patent Validity Challenges and The America Invents Act," Working papers 2017-21, University of Connecticut, Department of Economics, revised May 2018.
    3. Martin Watzinger & Thomas A. Fackler & Markus Nagler & Monika Schnitzer, 2020. "How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 328-359, November.
    4. Gustaf Bellstam & Sanjai Bhagat & J. Anthony Cookson, 2021. "A Text-Based Analysis of Corporate Innovation," Management Science, INFORMS, vol. 67(7), pages 4004-4031, July.
    5. Nagler, Markus & Watzinger, Martin & Fackler, Thomas & Schnitzer, Monika, 2016. "Antitrust, Patents, and Cumulative Innovation: Evidence from Bell Labs," VfS Annual Conference 2016 (Augsburg): Demographic Change 145580, Verein für Socialpolitik / German Economic Association.
    6. Watzinger, Martin & Fackler, Thomas A. & Nagler, Markus, 2017. "How Antitrust Enforcement Can Spur Innovation," Rationality and Competition Discussion Paper Series 4, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    patents; innovation; courts;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • 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

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