Working Paper: NBER ID: w30671
Authors: Utku U. Acikalin; Tolga Caskurlu; Gerard Hoberg; Gordon M. Phillips
Abstract: We examine the impact of lost intellectual property protection on innovation, competition, acquisitions, lawsuits and employment agreements. We consider firms whose ability to protect intellectual property (IP) using patents is weakened following the Alice Corp. vs. CLS Bank International Supreme Court decision. This decision has impacted patents in multiple areas including business methods, software, and bioinformatics. We use state-of-the-art machine learning techniques to identify firms’ existing patent portfolios’ potential exposure to the Alice decision. While all affected firms decrease patenting post-Alice, we find an unequal impact of decreased patent protection. Large affected firms benefit as their sales and market valuations increase, and their exposure to lawsuits decreases. They also acquire fewer firms post-Alice. Small affected firms lose as they face increased competition, product-market encroachment, and lower profits and valuations. They increase R&D and have their employees sign more nondisclosure agreements.
Keywords: Intellectual Property; Innovation; Competition; Machine Learning
JEL Codes: D43; G34; O31; O33; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lost intellectual property protection (O34) | decrease in patenting activity among affected firms (O39) |
| decrease in patenting activity among affected firms (O39) | increased innovation efforts (O36) |
| lost intellectual property protection (O34) | increased R&D efforts among small firms (O32) |
| Alice decision (Y60) | increased sales and market valuations for large firms (L25) |
| Alice decision (Y60) | fewer lawsuits for large firms (K41) |
| small firms (L25) | resort to nondisclosure agreements as a strategy (D82) |
| Alice decision (Y60) | reduction in acquisition activities for large firms (G34) |
| increased competition post-Alice (L49) | decreased patenting among small firms (O31) |