We would like to thank two anonymous referees and the editor for very constructive comments on an earlier version of the article. We are also grateful to Victor Aguirregabiria, Ashish Arora, Pierre Azoulay, Christian Catalini, Dietmar Harhoff, Nico Lacetera, Josh Lerner, Megan MacGarvie, Matt Mitchell, Jeff Thurk, Dan Trefler, and Heidi Williams for comments and suggestions on earlier drafts, and to Grid Thoma for helping with the matching algorithm. We also thank seminar and conference participants at Berkeley, Duke, Georgia Tech, Kellogg, Carlos III University Madrid, Max Planck Institute, Pompeu Fabra, SUNY Stony Brook, Toulouse, Toronto, and the ZEW. Jelena Bozovic and Christina Kim provided excellent research assistance. We are grateful for financial support from the Centre for Economic Performance at the London School of Economics and the Social Sciences and Humanities Research Council of Canada.
Trading and enforcing patent rights
Article first published online: 18 JUN 2013
Copyright © 2013 The Authors. The RAND Journal of Economics published by Wiley Periodicals, Inc. on behalf of RAND.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
The RAND Journal of Economics
Volume 44, Issue 2, pages 275–312, Summer 2013
How to Cite
Galasso, A., Schankerman, M. and Serrano, C. J. (2013), Trading and enforcing patent rights. The RAND Journal of Economics, 44: 275–312. doi: 10.1111/1756-2171.12020
The copyright line for this article was changed on 14 August 2014 after original online publication.
- Issue published online: 18 JUN 2013
- Article first published online: 18 JUN 2013
We study how the market for innovation affects enforcement of patent rights. We show that patent transactions arising from comparative advantages in commercialization increase litigation, but trades driven by advantages in patent enforcement reduce it. Using data on trade and litigation of individually owned patents in the United States, we exploit variation in capital gains tax rates across states as an instrument to identify the causal effect of trade on litigation. We find that taxes strongly affect patent transactions, and that trade reduces litigation on average, but the impact is heterogeneous. Patents with larger potential gains from trade are more likely to change ownership, and the impact depends critically on transaction characteristics.