Proprietary Costs and Sealing Documents in Patent Litigation

57 Pages Posted: 6 Dec 2018

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Joshua A. Lee

Brigham Young University

Zawadi Lemayian

Washington University in St. Louis

Date Written: December 1, 2017

Abstract

We study whether the sealing of a defendant’s judicial records during a patent lawsuit filing correlates with the defendant’s level of competition and disclosure. Courts permit sealing of judicial records when competitive damage outweighs the public interest in access to documents and records. We find that defendants with sealed judicial records have higher research and development (R&D), lower industry sales concentration, and more references to competition in their annual reports than defendants without sealed judicial records. We observe faster mean reversion of return on net operating assets when courts seal defendant records. The results suggest that sealing relates to archival measures of competition. Finally, consistent with proprietary costs restraining disclosure, we find that defendants with sealed judicial records are less likely to issue management forecasts, file 8-Ks less frequently, and have longer and less readable 10-Ks.

Keywords: proprietary costs

JEL Classification: M41

Suggested Citation

Frankel, Richard M. and Lee, Joshua A. and Lemayian, Zawadi, Proprietary Costs and Sealing Documents in Patent Litigation (December 1, 2017). Review of Accounting Studies, Vol. 23, No. #2, 2017. Available at SSRN: https://ssrn.com/abstract=3268920

Richard M. Frankel

Washington University in Saint Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Joshua A. Lee

Brigham Young University ( email )

Provo, UT
United States

Zawadi Lemayian (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

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