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Patent litigation and firm performance: the role of the enforcement system

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  • Paula M. Schliessler
Abstract
This paper analyzes the impact of the German patent litigation system on the firms involved in patent litigation suits. The German system of separation of infringement and invalidity decisions provides patent holders with a window of opportunity to enforce patents that may later be invalidated. This shifts a major share of the risk to the defendant, allocating bargaining power to the plaintiff. This study empirically provides support for this incongruity by analyzing how patent litigation outcome in Germany affects the financial performance of the disputing firms. I show that plaintiffs on average profit from litigation while defendants agreeing upon a settlement deal lose as much as defendants losing in trial. I further show that small and unexperienced firms, particularly defendants, are at a disadvantage when dealing with litigation. The results stress that, as long as patent validity cannot entirely be established prior to the infringement proceedings, defendants, and particularly small defendants, will be disadvantaged by a separation of infringement and nullity proceedings.

Suggested Citation

  • Paula M. Schliessler, 2015. "Patent litigation and firm performance: the role of the enforcement system," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(2), pages 307-343.
    • Handle: RePEc:oup:indcch:v:24:y:2015:i:2:p:307-343.
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    File URL: http://hdl.handle.net/10.1093/icc/dtv001
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    Cited by:

    1. Hussinger, Katrin & Dick, Johannes M.H. & Czarnitzki, Dirk, 2018. "Ownership concentration and innovativeness of corporate ventures," Research Policy, Elsevier, vol. 47(2), pages 527-541.
    2. Hu, Wei & Yoshioka-Kobayashi, Tohru & Watanabe, Toshiya, 2017. "Impact of patent litigation on the subsequent patenting behavior of the plaintiff small and medium enterprises in Japan," International Review of Law and Economics, Elsevier, vol. 51(C), pages 23-28.
    3. 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).
    4. Czarnitzki, Dirk & van Criekingen, Kristof, 2018. "New evidence on determinants of IP litigation: A market-based approach," ZEW Discussion Papers 18-018, ZEW - Leibniz Centre for European Economic Research.
    5. Wang, Ling & Zhang, Yujia & Yan, Yushan, 2023. "Offensive patent litigation strategic choice: An organizational routine perspective," Technovation, Elsevier, vol. 122(C).
    6. Appio, Francesco Paolo & Baglieri, Daniela & Cesaroni, Fabrizio & Spicuzza, Lucia & Donato, Alessia, 2022. "Patent design strategies: Empirical evidence from European patents," Technological Forecasting and Social Change, Elsevier, vol. 181(C).
    7. Kruppert, Rabea, 2017. "Dispute the patent, short the stock: Empirical analysis of a new hedge fund strategy," International Review of Law and Economics, Elsevier, vol. 50(C), pages 25-35.
    8. Jung Kwan Kim & Ram Mudambi, 2020. "An ecosystem-based analysis of design innovation infringements: South Korea and China in the global tire industry," Journal of International Business Policy, Palgrave Macmillan, vol. 3(1), pages 38-57, March.
    9. Lee, Jong-Seon & Kim, Nami & Bae, Zong-Tae, 2019. "The effects of patent litigation involving NPEs on firms’ patent strategies," Technological Forecasting and Social Change, Elsevier, vol. 149(C).
    10. Kafouros, Mario & Aliyev, Murod & Krammer, Sorin M.S., 2021. "Do firms profit from patent litigation? The contingent roles of diversification and intangible assets," Research Policy, Elsevier, vol. 50(6).
    11. Pongsapak Chindasombatcharoen & Pattanaporn Chatjuthamard & Pornsit Jiraporn & Sirimon Treepongkaruna, 2022. "Achieving sustainable development goals through board size and innovation," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(4), pages 664-677, August.
    12. Yu-Shan Chen & Yu-Hsien Lin & Tai-Hsi Wu & Shu-Tzu Hung & Pei-Ju Lucy Ting & Chen-Han Hsieh, 2019. "Re-examine the determinants of market value from the perspectives of patent analysis and patent litigation," Scientometrics, Springer;Akadémiai Kiadó, vol. 120(1), pages 1-17, July.

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