Trading and Enforcing Patent Rights

Abstract

We would like to thank two anonymous referees and the Editor for very constructive comments on an earlier version of the paper. We are also grateful to Victor Aguirregabiria, Ashish Arora, Pierre Azoulay, Christian Catalini, Dietmar Harhoff, Nico Lacetera, Josh Lerner, Megan MacGarvie, Matt Mitchell, Jeff Thurk, Dan Trefler and Heidi Williams for comments and suggestions on earlier drafts, and to Grid Thoma for helping with the matching algorithm. We also thank seminar and conference participants at Berkeley, Duke, Georgia Tech, Kellogg, Carlos III University Madrid, Max Planck Institute, Pompeu Fabra, SUNY Stony Brook, Toulouse, Toronto and the ZEW. Jelena Bozovic and Christina Kim provided excellent research assistance. We are grateful for financial support from the Centre for Economic Performance at the London School of Economics and the Social Sciences and Humanities Research Council of Canada. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.© 2011 by Alberto Galasso, Mark Schankerman, and Carlos J. Serrano. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. ABSTRACTWe 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, but the impact is heterogeneous. We show that patents with larger potential gains from trade are more likely to change ownership, suggesting that the market for innovation is efficient, and the impact of trade on litigation depends on characteristics of the transactions.

Litigation risks and firms innovation dynamics after the IPO

“…In this context, a firm's patent portfolio can be leveraged as a bargaining chip in order to deal with potential patent hold-up problems and force competitors into negotiations (Cohen et al, 2000;Hall and Ziedonis, 2001). In this sense, several studies have documented that patented inventions of firms with larger patent portfolios are less likely to be involved in patent litigation cases (Lanjouw and Shankerman, 2004;Galasso et al, 2013). For such reasons, we advance the following hypothesis: Hypothesis 2.…”

Cross-country learning from patents: an analysis of citations flows in innovation trajectories

“…Specific studies on the relationship among patent age and selling price have been conducted (Vimalnath et al, 2017), but they are still limited, too (Kim & Lee, 2019). A higher, but still limited, quota of studies is focused on patent auctions (Caviggioli & Ughetto, 2013;Fischer & Leidinger, 2014;Odasso et al, 2015;Piirainen, Andersen & Andersen, 2013;Sneed & Johnson, 2009;Sreekumaran Nair et al, 2011;Vimalnath et al, 2017) and reassignments (Caviggioli et al, 2017;Drivas & Economidou, 2015;Figueroa & Serrano, 2013;Galasso et al, 2013;Serrano, 2010). In detail, only Drivas and Economidou, (2015) investigate on the geographic aspects related to knowledge flows, but they focus on cross-organizational patent acquisitions within the U.S. only.…”

Knowledge Networks and Markets

“…Current statistics on international and domestic IP trade may be partly explained by the relative advantages of setting up separate companies and vehicles for managing revenues arising from the use of IP. 20 Recent academic research has for example demonstrated that differences in capital gains taxes that apply to patent sales can drive incentives for individual inventors to sell their patents (Galasso et al, 2011). This allows the researchers to infer that markets in which patents are more likely to be traded will benefit from reduced litigation due to comparative advantage among sellers in patent enforcement.…”