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Shooting Ourselves in the Foot to Kill a Fly? Patent Enforcement and Market for Technology

Aydin Ozden, S. ORCID: 0000-0002-3544-9145 (2016). Shooting Ourselves in the Foot to Kill a Fly? Patent Enforcement and Market for Technology. Academy of Management Proceedings, 2016(1), article number 12602. doi: 10.5465/ambpp.2016.119


The U.S. patent policy has been subjected to fundamental changes over the last several years and further patent reforms are about to enter the U.S. Congressional calendar. After the enactment of the America Invents Act (AIA) in 2011, the U.S. Congress is willing to resume the patent reform to pass an additional legislation to prevent abusive patent litigation. Supporters of the patent reform assert that it would retrench costly lawsuits, reduce patent abuses, and stimulate innovation. Opponents of the patent reform argue to the contrary that it would depress patent value and stifle innovation. How these ongoing legislative changes have influenced the patent enforcement strength and, in turn, firms’ incentives to patent and engage in technology trade is an open question and the main interest of this study.

As Teece (1986) defines, the patent system refers to the environmental factors that govern an innovator's ability to capture the profits generated by an innovation such as the efficacy of legal mechanisms of protection. Gambardella, Guiri & Luzzi (2007) claim that ‘patents are stronger if they are well enforced by the judicial system’. Therefore, patent enforcement plays a key role in determining the strength of a patent system.

In this study, I try to answer the following research questions: How does the patent enforcement strength affect firms’ patenting decisions? What is the impact of patent enforcement strength on the functioning of market for technology? In doing so, I exploit a recent shift in the U.S. patent policy reflected in an exemplary U.S. Supreme Court decision, i.e. eBay v. MercExchange (2006), to present how the weakening of patent enforcement affects the volume of patent applications and licensing agreements of U.S. firms, compared to European firms, in intellectual property (IP)-intensive industries. This research aims at contributing new insights to the market for technology literature by depicting the relationship between patent enforcement strength and firms’ incentives to patent and engage in technology trade. For this purpose, it provides systematic evidence on a large dataset to address an important and controversial debate in the literature.

Publication Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
K Law
Departments: Bayes Business School > Management
SWORD Depositor:
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