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Patent thickets, courts, and the market for innovation

Authors


  • We are grateful to the editor and two referees for very constructive comments on an earlier draft. We also thank David Adelman, Jim Bessen, Katrin Cremers, Bronwyn Hall, Saul Lach, Daniel Quint, Carlos Serrano, Tim Simcoe, Christopher Snyder, Rosemarie Ziedonis, and seminar participants at the University of Arizona, Boston University, Duke, Toronto, Mannheim, the Kauffman Summer Legal Institute, and the NBER for helpful suggestions. Schankerman gratefully acknowledges financial support from the Lady Davis Fellowship at the Hebrew University and the Muzzy Chair in Entrepreneurship at the University of Arizona.

Abstract

We study how fragmentation of patent rights and the formation of the Court of Appeals for the Federal Circuit (CAFC) affected the duration of patent disputes, and thus the speed of technology diffusion through licensing. We develop a model of patent litigation which predicts faster settlement when patent rights are fragmented and when there is less uncertainty about court outcomes, as was associated with the “pro-patent shift” of the CAFC. We confirm these predictions empirically using a data set that covers patent suits in U.S. district courts during the period 1975–2000. Finally, we analyze how fragmentation affects total settlement delay, considering both the reduction in dispute duration and the increase in the number of patent negotiations.

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