Trading and Enforcing Patent Rights

Mark Schankerman, Carlos Serrano and Alberto Galasso

No 8573, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how the market for innovation affects enforcement of patent rights. Conventional wisdom associates the gains from trade with comparative advantage in manufacturing or marketing. We show that these gains imply that patent transactions should increase litigation risk. We identify a new source of gains from trade, comparative advantage in patent enforcement, and show that transactions driven by this motive should reduce litigation. Using data on trade and litigation of individually-owned patents in the U.S., we exploit variation in capital gains tax rates as an instrument to identify the causal effect of trade on litigation. We find that taxes strongly affect patent transactions, and that reallocation of patent rights reduces litigation risk, on average. The impact of trade on litigation is heterogeneous, however. Patents with larger potential gains from trade are more likely to change ownership, suggesting that the market for innovation is efficient. We also show that the impact of trade on litigation depends on characteristics of the transactions.

Keywords: Patents; Litigation; Market for innovation; Capital gains taxation (search for similar items in EconPapers)
JEL-codes: H24 K41 O32 O34 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-ino, nep-int, nep-ipr, nep-pr~ and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Trading and enforcing patent rights (2013)
Working Paper: Trading and enforcing patent rights (2013)
Working Paper: Trading and Enforcing Patent Rights (2011)
Working Paper: Trading and Enforcing Patent Rights (2011)
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