New Evidence on Determinants of Intellectual Property Litigation: A Market-Based Approach

Abstract

We contribute to the economic literature on patent litigation by taking a new perspective. In the past, scholars mostly focused on specific litigation cases at the patent level and related technological characteristics to the event of litigation. However, observing intellectual property (IP) disputes suggests that not only technological characteristics may trigger litigation suits, but also the market positions of firms, and that firms dispute not only over single patents but often over portfolios. This paper examines the occurrence of IP litigation cases in Belgian firms using the 2013 Community Innovation Survey with supplemental information on IP litigation and patent portfolios. The rich survey information regarding firms’ general innovation strategies enables us to introduce market-related variables such as sales with new products, as well as sales based mainly on imitation and incremental innovation. Our results indicate that when controlling for firms’ IP portfolios, the composition of sales in terms of innovation and imitation has additional explanatory power regarding litigation propensities. Firms with high sales from innovations are more likely to become plaintiffs in court. Contrastingly, firms with high sales from incremental innovation and imitation are more likely to become defendants in court and, moreover, are more likely to negotiate settlements outside of court.