Discussion Paper Details

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Title: Patents and Cumulative Innovation: Causal Evidence from the Courts

Author(s): Alberto Galasso and Mark Schankerman

Publication Date: April 2013

Keyword(s): courts, cumulative innovation, judges, litigation and patents

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Galasso, A and Schankerman, M. 2013. 'Patents and Cumulative Innovation: Causal Evidence from the Courts'. London, Centre for Economic Policy Research.