Does Patent Litigation Reduce Corporate R&D? An Analysis of US Public Firms

Abstract

This study investigates if firms' involvement in patent litigation as alleged infringers hinders their innovation. I develop a simple model that predicts a decrease in innovation following patent litigation. I investigate the model's implications in a sample of publicly listed US firms, using a combination of propensity score matching and difference-in-differences estimation. I find a negative impact of patent litigation on corporate R&D intensity - in the range of 2.6-4.7%-points - in small firms (with less than 500 employees), that are involved in extensive patent lawsuits (captured by the number of legal documents filed).

Keywords: Patent litigation, corporate R&D, differences-in-differences, propensity score matching

JEL Classification: O34, K11