Trading and Enforcing Patent Rights

65 Pages Posted: 30 Aug 2011

See all articles by Alberto Galasso

Alberto Galasso

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

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Date Written: August 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, but the impact is heterogeneous. We show that patents with larger potential gains from trade are more likely to change ownership, suggesting that the market for innovation is efficient, and 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 2011). NBER Working Paper No. w17367. Available at SSRN: https://ssrn.com/abstract=1919441

Alberto Galasso (Contact Author)

University of Toronto - Strategic Management ( email )

Canada

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 )

London
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

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