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Trading and Enforcing Patent Rights

65 Pages Posted: 20 Aug 2011 Last revised: 28 Oct 2014

Alberto Galasso

University of Toronto - Rotman School of Management; University of Toronto - Strategic Management

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

Carlos J. Serrano

Universitat Pompeu Fabra, Barcelona GSE; Banco de España - Research Department; University of Toronto - Rotman School of Management, RIIB; National Bureau of Economic Research (NBER)

Date Written: August 18, 2011

Abstract

We 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. The impact of trade on litigation is heterogeneous, however. Patents with larger potential gains from trade are more likely to change ownership, suggesting that the market for innovation is efficient. We also show that the impact of trade on litigation depends on characteristics of the transactions.

Suggested Citation

Galasso, Alberto and Schankerman, Mark A. and Serrano, Carlos J., Trading and Enforcing Patent Rights (August 18, 2011). Available at SSRN: https://ssrn.com/abstract=1912253 or http://dx.doi.org/10.2139/ssrn.1912253

Alberto Galasso (Contact Author)

University of Toronto - Strategic Management ( email )

105 St George Street
Toronto, ON M5S 1L2
Canada

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/facbios/viewFac.asp?facultyID=alberto.galasso

Mark A. Schankerman

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Carlos J. Serrano

Universitat Pompeu Fabra, Barcelona GSE ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://www.econ.upf.edu/~cserrano

Banco de España - Research Department ( email )

Alcalá 48
Madrid, 28014
Spain

University of Toronto - Rotman School of Management, RIIB

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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