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The effect of patent litigation and patent assertion entities on entrepreneurial activity

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  • Kiebzak, Stephen
  • Rafert, Greg
  • Tucker, Catherine E.

Abstract

This paper empirically investigates the statistical relationship between levels of patent litigation and venture capital investment in the U.S. We find that VC investment, a major funding source for entrepreneurial activity, initially increases with the number of litigated patents. However, there is a “tipping point” where further increases in the number of patents litigated are associated with decreased VC investment, which suggests an inverted U-shaped relation between patent litigation and VC investment. This appears strongest for technology patents, and negligible for products such as pharmaceuticals. Strikingly, we find evidence that litigation by frequent patent litigators, a proxy for litigation by patent assertion entities, is directly associated with decreased VC investment, with no positive effects initially.

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  • Kiebzak, Stephen & Rafert, Greg & Tucker, Catherine E., 2016. "The effect of patent litigation and patent assertion entities on entrepreneurial activity," Research Policy, Elsevier, vol. 45(1), pages 218-231.
    • Handle: RePEc:eee:respol:v:45:y:2016:i:1:p:218-231
    DOI: 10.1016/j.respol.2015.07.002
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    Cited by:

    1. Horner, Sam & Papageorgiadis, Nikolaos & Sofka, Wolfgang & Angelidou, Sofia, 2022. "Standing your ground: Examining the signaling effects of patent litigation in university technology licensing," Research Policy, Elsevier, vol. 51(10).
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    3. Grazia Sveva Ascione & Laura Ciucci & Claudio Detotto & Valerio Sterzi, 2022. "Universities involvement in patent litigation: an analysis of the characteristics of US litigated patents," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(12), pages 6855-6879, December.
    4. Valerio Sterzi & Cecilia Maronero & Gianluca Orsatti & Andrea Vezzulli, 2024. "Non-practicing entities in Europe: an empirical analysis of patent acquisitions at the European Patent Office," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(5), pages 1271-1297.
    5. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    6. Lauren Cohen & Umit G. Gurun & Scott Duke Kominers, 2019. "Patent Trolls: Evidence from Targeted Firms," Management Science, INFORMS, vol. 65(12), pages 5461-5486, December.
    7. Alexei Alexandrov & Russell Pittman & Olga Ukhaneva, 2018. "Pricing of Complements in the U.S. Freight Railroads: Cournot Versus Coase," EAG Discussions Papers 201801, Department of Justice, Antitrust Division.
    8. Filippo Mezzanotti, 2021. "Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D," Management Science, INFORMS, vol. 67(12), pages 7362-7390, December.
    9. Stefano Comino & Fabio M. Manenti & NIkolaus Thumm, 2017. "The Role of Patents in Information and Communication Technologies (ICTs). A survey of the Literature," "Marco Fanno" Working Papers 0212, Dipartimento di Scienze Economiche "Marco Fanno".
    10. Alexandrov, Alexei & Pittman, Russell & Ukhaneva, Olga, 2017. "Royalty stacking in the U.S. freight railroads: Cournot vs. Coase," MPRA Paper 78249, University Library of Munich, Germany.
    11. Mukund Chari & H. Kevin Steensma & Charles Connaughton & Ralph Heidl, 2022. "The influence of patent assertion entities on inventor behavior," Strategic Management Journal, Wiley Blackwell, vol. 43(8), pages 1666-1690, August.
    12. Sterzi, Valerio & Maronero, Cecilia & Orsatti, Gianluca & Vezzulli, Andrea, 2023. "Non-Practicing Entities and their patent acquisition activity in Europe," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 202306, University of Turin.
    13. Zhang, Ya-Feng & Li, Li-Ming & Xu, Ke, 2022. "Do specialized intellectual property courts show a pro-patent propensity? Evidence from China," International Review of Law and Economics, Elsevier, vol. 70(C).
    14. Bleier, Alexander & Goldfarb, Avi & Tucker, Catherine, 2020. "Consumer privacy and the future of data-based innovation and marketing," International Journal of Research in Marketing, Elsevier, vol. 37(3), pages 466-480.
    15. Chen, Feng & Hou, Yu & Qiu, Jiaping & Richardson, Gordon, 2023. "Chilling effects of patent trolls," Research Policy, Elsevier, vol. 52(3).
    16. Tang, Xudong & Wang, Lin, 2024. "When your friend takes a fall: Spillovers of patent infringement lawsuits on firm innovation via cross-owners," Economic Modelling, Elsevier, vol. 131(C).
    17. Ya-Fang Wang, 2022. "Audit Fees, Patent Litigation, and Long-Term Performance," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 15(1), pages 7-15, July.
    18. Bereskin, Fred & Hsu, Po-Hsuan & Latham, William & Wang, Huijun, 2023. "So Sue Me! The cross section of stock returns related to patent infringement allegations," Journal of Banking & Finance, Elsevier, vol. 148(C).
    19. Wang, Kedi & Wu, Chen, 2023. "Financial-judicial specialization and corporate misconduct: Evidence from the establishment of the Shanghai Financial Court," Economics Letters, Elsevier, vol. 229(C).
    20. Papageorgiadis, Nikolaos & Procopiou, Andreas & Sofka, Wolfgang, 2023. "Unintended consequences of outcome based compensation – How CEO bonuses, stocks and stock options affect their firms' patent litigation," Research Policy, Elsevier, vol. 52(8).
    21. He, Leshui, 2020. "A theory of pre-filing settlement and patent assertion entities," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    22. Huang, Xiaoqi & Liu, Wei & Zhang, Zhan & Zhao, Zhihui, 2022. "Intensive judicial oversight and corporate green innovations: Evidence from a quasi-natural experiment in China," China Economic Review, Elsevier, vol. 74(C).
    23. Siddiqui, Sayla & Shams, Syed, 2023. "Media coverage and patent trolls: A study on US high-tech firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    24. G.S Ascione & L. Ciucci & C. Detotto & V. Sterzi, 2021. "Do universities look like patent trolls? An Empirical Study of University Patent Infringement Litigation in the United States," Working Paper CRENoS 202105, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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