The effect of patent litigation on firm performance: Evidence for Germany

Paula Schliessler

No 13-015, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: I analyse how patent litigation outcome in Germany affects the performance of the disputing firms by interpreting changes in a firm's credit rating as a proxy for changes in firm performance. The results match theoretical considerations on the functioning of the bifurcated German patent litigation system: The separation of litigation and invalidity decisions, resulting in invalidity decisions taking much longer than decisions on infringement, provides patent holders with a window of opportunity to enforce patents that may later be invalidated. This shifts a major share of the immediate risk to the defendant and allocates bargaining power to the plaintiff. The estimation results provide support for this incongruity. Plaintiffs on average profit from litigation while defendants agreeing upon a settlement deal lose as much as defendants losing in trial. I further show that small, inexperienced defendant firms are at a disadvantage when dealing with litigation.

Keywords: Patent; Patent Litigation; Credit Rating; Firm Value (search for similar items in EconPapers)
JEL-codes: K41 O34 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr and nep-pr~
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:13015

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