Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D
Management Science · 2021 · Volume 67 · Issue 12
Abstract
I examine how patent enforcement affects corporate research and development (R&D), exploiting the legal changes induced by the Supreme Court decision eBay v. MercExchange . This ruling increased courts’ flexibility in remedying patent cases and effectively lowered the potential costs of patent litigation for defendants. For identification, I compare innovative activity across firms differentially exposed to patent litigation before the ruling. Across several measures, I find that the decision led to a general increase in innovation. This result confirms that the changes in enforcement induced by the ruling reduced some of the distortions caused by patent litigation. Exploring the channels, I show that patent litigation negatively affects investment because it lowers the returns from R&D and exacerbates its financing constraints. This paper was accepted by Gustavo Manso, finance.
Keywords
patent litigation, innovation, corporate investments
Enable JavaScript for citation tools and additional paper interactions.