Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D

Filippo Mezzanotti ()
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Filippo Mezzanotti: Kellogg School of Management, Northwestern University, Evanston, Illinois 60208

Management Science, 2021, vol. 67, issue 12, 7362-7390

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.

Keywords: patent litigation; innovation; corporate investments (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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