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Patents and Cumulative Innovation:Causal Evidence from the Courts

  • Galasso, Alberto
  • Schankerman, Mark
Registered author(s):

    Cumulative innovation is central to economic growth. Do patent rights facilitate or impede such follow-on innovation? This paper studies the causal effect of removing patent protection through court invalidation on subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeal for the Federal Circuit to control for the endogeneity of patent invalidation. We find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent, on average, but the impact is highly heterogeneous. Patent rights appear to block follow-on innovation only in the technology fields of computers, electronics and medical instruments. The effect is entirely driven by invalidation of patents owned by large patentees that triggers more follow-on innovation by small firms.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25838/1/070iirWP13_16.pdf
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    Paper provided by Institute of Innovation Research, Hitotsubashi University in its series IIR Working Paper with number 13-16.

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    Length: 44, [17] p.
    Date of creation: Aug 2013
    Date of revision:
    Handle: RePEc:hit:iirwps:13-16
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    Web page: http://www.iir.hit-u.ac.jp/

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    10. Pierre Azoulay & Joshua S. Graff Zivin & Jialan Wang, 2008. "Superstar Extinction," NBER Working Papers 14577, National Bureau of Economic Research, Inc.
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    17. Alberto Galasso & Mark Schankerman & Carlos J. Serrano, 2013. "Trading and enforcing patent rights," LSE Research Online Documents on Economics 51080, London School of Economics and Political Science, LSE Library.
    18. Ashish Arora, 1995. "Licensing Tacit Knowledge: Intellectual Property Rights And The Market For Know-How," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 4(1), pages 41-60.
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    21. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
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    23. Alberto Galasso & Mark Schankerman, 2010. "Patent thickets, courts, and the market for innovation," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 472-503.
    24. Alberto Galasso & Mark Schankerman & Carlos J. Serrano, 2013. "Trading and enforcing patent rights," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 275-312, 06.
    25. Alberto Galasso, 2012. "Broad Cross-License Negotiations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 873-911, December.
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