{"id":1290,"date":"2019-01-07T12:16:00","date_gmt":"2019-01-07T17:16:00","guid":{"rendered":"https:\/\/sites.bu.edu\/tpri\/?p=1290"},"modified":"2019-01-07T12:47:36","modified_gmt":"2019-01-07T17:47:36","slug":"roadblock-to-innovation-the-role-of-patent-litigation-in-corporate-rd","status":"publish","type":"post","link":"https:\/\/sites.bu.edu\/tpri\/2019\/01\/07\/roadblock-to-innovation-the-role-of-patent-litigation-in-corporate-rd\/","title":{"rendered":"Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D"},"content":{"rendered":"

Filippo Mezzanotti<\/p>\n

Patent trolls have been denounced for the damage they are perceived to do to the economy and to the companies that they extract settlements from. \u00a0What happens, however, when one of the patent trolls\u2019 most powerful weapons is taken away? <\/span><\/p>\n

A new paper<\/a> examines the effects on innovation after the Supreme Court\u2019s 2006 decision in <\/span>eBay v. MercExchange<\/span><\/i>. \u00a0Before <\/span>eBay<\/span><\/i>, courts would almost automatically enjoin patent infringers from any further use or sale of an infringing product or service. \u00a0After <\/span>eBay<\/span><\/i>, courts had the discretion to allow the infringer to continue to use or sell an infringing product and award money damages instead. \u00a0Since an injunction could stop an entire product or even shut down a company, the relaxation of the injunction rule reduced the risk to defendant firms in patent litigation and limited the power of patent trolls\u2019 threat of an injunction.<\/span><\/p>\n

Filippo Mezzanotti, assistant professor of finance at Northwestern\u2019s Kellogg School of Management and fellow at TPRI, asks what effect this new rule had on innovation. \u00a0Several findings stand out. <\/span><\/p>\n

First, the share price of so-called \u201cpatent trolls\u201d dropped significantly, both on the day of the decision and over the next month, since they would no longer have the powerful threat of injunctions to use in patent litigation to extract large settlements or licensing agreements. \u00a0At the same time, firms that operated in technology areas with higher levels of patent litigation before <\/span>eBay<\/span><\/i> tended to see their stock prices increase the day that <\/span>eBay<\/span><\/i> was announced. \u00a0These stock price movements suggest that the market had not anticipated the <\/span>eBay<\/span><\/i> decision, and that the market expected it to harm patent trolls and result in less future patent litigation for those companies often having to defend patents in court.<\/span><\/p>\n

Second, Mezzanotti compared the patenting activity of firms operating in highly-litigated technologies with that of firms in technologies without as much litigation; the more litigious industries would be those most affected by the <\/span>eBay<\/span><\/i> decision. \u00a0He found that firms with more exposure to patent litigation pre-<\/span>eBay<\/span><\/i> filed more patent applications after <\/span>eBay<\/span><\/i> than those in other industries. \u00a0While the average quality of patents remained stable (as measured by citations in other patents), firms were actually more likely to develop \u201cbreakthrough\u201d technologies, i.e., patents in the top 10% of cited patents for its technology class. \u00a0The <\/span>eBay <\/span><\/i>decision freed up innovative firms to focus on true innovation, rather than litigating patents. \u00a0<\/span><\/p>\n

More than twelve years after it was decided, <\/span>eBay<\/span><\/i> continues to have an effect on firms\u2019 behavior and the economy. \u00a0This paper provides novel evidence showing how <\/span>eBay<\/span><\/i> may have helped spur innovation activity at firms operating in litigious technology areas. \u00a0<\/span><\/p>\n

Working paper.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Filippo Mezzanotti<\/p>\n

A new study on the impact of a patent-policy change on corporate R&D spending and innovation. <\/p>\n","protected":false},"author":11401,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[16,20],"tags":[27,41,7,9],"_links":{"self":[{"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/posts\/1290"}],"collection":[{"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/users\/11401"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/comments?post=1290"}],"version-history":[{"count":4,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/posts\/1290\/revisions"}],"predecessor-version":[{"id":1294,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/posts\/1290\/revisions\/1294"}],"wp:attachment":[{"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/media?parent=1290"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/categories?post=1290"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sites.bu.edu\/tpri\/wp-json\/wp\/v2\/tags?post=1290"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}