Doctoral Dissertation Research: Patent Policy Changes in the Court: A study of Heterogeneous Impacts on Business Models and Firms' Participation

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The need to accommodate new technologies at an increasingly fast pace has led the judicial branch to become a key source of changes in patent policy in the United States. Since the 1980s, within a relatively static framework set by the two other branches of government, courts' rulings on legal disputes have continuously changed the strength of patents in the US. Meanwhile, there is still controversy regarding the impact of the strength of patents on innovation. The debate has been stymied by difficulties in understanding the effect of various facets of patent policy. This project offers a solution to advance our understanding of how courts shape the patent system by (1) distinguishing three aspects of strength in the analysis: patentability, breadth and ability to exclude and (2) examining the heterogeneous impact of these court decisions on the rate and direction of firms' innovative activities. The research answers the following three questions. First, what influences decision-making for patent-related Supreme Court decisions? Second, do firms react to decisions in the direction expected by the Court? Lastly, do firms benefit from participating in policymaking? As a result, the project also provides new insights on the policymaking process by the courts, focusing on the constraints and external influences in decision-making, including firms' incentives to advocate for their position. In addition, this project provides an understanding of the aggregated effect of apparently disjointed cases on the overall rate and direction of innovation. The first part examines the policymaking process in the court based on all US Supreme Court patent cases over the period 2000-2015 to provide an understanding of the effect of participation of stakeholders (as party in a case, amici or through lobbying) on the decisions that change patent strength. The second part provides theoretical and empirical insights on the long-debated relationship between patent strength and innovation. It challenges the view that weaker patents lead to fewer innovations. To confront theories in the existing literature predicting changes in firm strategy leading to both increases and decreases in innovation, mixed methodology is used by combining the analysis of court documents with quantitative estimations of the impact using a panel data set of patent and firm data to examine the mechanisms behind patent policymaking and firm strategy. Lastly, the third part examines whether firms participating in patent policymaking obtain benefits reflected in their performance. For all three parts of the project, strong empirical evidence is provided regarding the mechanisms behind patent policymaking and firm strategy. An original research design is used to estimate the impact of a patent policy change on firms' behavior while controlling for competing explanations for the effects. The project also relies on unique data, an exhaustive panel data set matching patents with time series firm-level data on the entire population of French firms, based on unique identifiers, over the period of 1995-2014. Such data allow novel insights by distinguishing impacts on propensity to use patents from intensity of engagement in innovative activities and identifying population level evidence on firm formation and first-time involvement in innovative activities.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.