Murat Celik from the University of Toronto will present "The Efficiency of Patent Litigation"

Abstract: How efficient is the U.S. patent litigation system? Estimating a novel dynamic model, we characterize the litigation system’s role in shaping innovation. In our model, heterogeneous firms innovate and may sue each other for patent infringement. In equilibrium, expected future litigation activity impacts firm innovation incentives. Moreover, some firms create positive innovation externalities while others impose negative externalities. Litigation reform can, therefore, improve or harm welfare, depending on how heterogeneous firms endogenously select into lawsuits. Estimating the model, we evaluate historical and recently proposed litigation reforms. Defendant-friendly reforms promote innovation and boost economic growth, improving welfare by up to 3.29%.