Imitation and Valuation of Novel Designs

Abstract

Novel designs have been susceptible to imitations with minor modifications until 2008: that year, an unexpected Federal Circuit Court of Appeals decision effectively clarified the protection scope of designs. We show empirical evidence that the decision enhanced the protection for novel designs with more features: they become more valuable and are subject to fewer imitations after this decision. We then show that these benefits aggregate to the firm level: the market values of firms owning a larger stock of design features increase relatively more after this decision. Finally, we show that the decision changes firm operations: firms with a larger stock of design features became more profitable, and more active in exploring new product and technological innovations, after this decision.

Keywords: product design, imitation, patent scope, market competition

JEL Classification: G18, K11, L51, O34