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The Litigation of Financial Innovations

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  • Josh Lerner

Abstract

This paper examines the litigation of patents relating to financial products and services. I show that these grants are being litigated at a rate 27-39 times greater than that of patents as a whole. The patents being litigated are disproportionately those issued to individuals and to smaller, private entities and those with features that may proxy for higher quality. Larger entities are disproportionately targeted in litigation. I discuss how the findings are in large part consistent with the theoretical literature on the economics of litigation.

Suggested Citation

  • Josh Lerner, 2010. "The Litigation of Financial Innovations," Journal of Law and Economics, University of Chicago Press, vol. 53(4), pages 807-831.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/655757
    DOI: 10.1086/655757
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    References listed on IDEAS

    as
    1. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-151, Spring.
    2. Lanjouw, Jean O & Lerner, Josh, 2001. "Tilting the Table? The Use of Preliminary Injunctions," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 573-603, October.
    3. Tufano, Peter, 1989. "Financial innovation and first-mover advantages," Journal of Financial Economics, Elsevier, vol. 25(2), pages 213-240, December.
    4. Jean O. Lanjouw & Ariel Pakes & Jonathan Putnam, 1998. "How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 405-432, December.
    5. Van Horne, James C, 1985. "Of Financial Innovations and Excesses," Journal of Finance, American Finance Association, vol. 40(3), pages 621-631, July.
    6. Lerner, Josh, 2006. "The new new financial thing: The origins of financial innovations," Journal of Financial Economics, Elsevier, vol. 79(2), pages 223-255, February.
    7. Dietmar Harhoff & Francis Narin & F. M. Scherer & Katrin Vopel, 1999. "Citation Frequency And The Value Of Patented Inventions," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 511-515, August.
    8. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September.
    9. Josh Lerner, 2002. "Where Does State Street Lead? A First Look at Finance Patents, 1971 to 2000," Journal of Finance, American Finance Association, vol. 57(2), pages 901-930, April.
    10. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
    11. Browne, Mark J & Puelz, Robert, 1999. "The Effect of Legal Rules on the Value of Economic and Non-economic Damages and the Decision to File," Journal of Risk and Uncertainty, Springer, vol. 18(2), pages 189-213, August.
    12. Miller, Merton H., 1986. "Financial Innovation: The Last Twenty Years and the Next," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(4), pages 459-471, December.
    13. repec:bla:jindec:v:46:y:1998:i:4:p:405-32 is not listed on IDEAS
    14. Joseph Farrell & Carl Shapiro, 2008. "How Strong Are Weak Patents?," American Economic Review, American Economic Association, vol. 98(4), pages 1347-1369, September.
    15. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 463-495, October.
    16. Robert C. Merton, 1992. "Financial Innovation And Economic Performance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(4), pages 12-22, January.
    17. George L. Priest & Benjamin Klein, 1984. "The Selection of Disputes for Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 13(1), pages 1-56, January.
    18. Rosenberg, D. & Shavell, S., 1985. "A model in which suits are brought for their nuisance value," International Review of Law and Economics, Elsevier, vol. 5(1), pages 3-13, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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