Working Paper: CEPR ID: DP9458
Authors: Alberto Galasso; Mark Schankerman
Abstract: Cumulative innovation is central to economic growth. Do patent rights facilitate or impede such follow-on innovation? This paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeal for the Federal Circuit to control for the endogeneity of patent invalidation. We find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent, on average, but the impact is highly heterogeneous. Patent rights appear to block follow-on innovation only in the technology fields of computers, electronics and medical instruments. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators, suggesting that patents may impede the ?democratization? of innovation.
Keywords: cumulative innovation; patents; litigation; judges; courts
JEL Codes: K41; L24; O31; O32; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| patent invalidation (L49) | citations to the focal patent (O34) |
| judges' propensity to invalidate patents (L49) | patent invalidation (L49) |
| patent invalidation (L49) | follow-on innovation by small firms (O36) |
| patent invalidation (L49) | heterogeneity of effects across different technology fields (D29) |
| patent invalidation (L49) | characteristics of the bargaining environment surrounding the patents (L24) |