Innovation, firm strategy and patent litigation

This thesis comprises three chapters with the enforcement of intellectual property rights as a central theme. The first chapter explores the effect of patent ‘thickets’ on litigation propensity. Patent thickets, involve fragmented ownership rights, which lead to the anticommons problem, and unclear property boundaries which lead to uncertainty. I distinguish between these two aspects of patent thickets and argue that an important reason for unclear claims is the increase in technological diversity associated with multi-component technologies. I develop theory that predicts that both ownership fragmentation and technological diversity have a positive causal impact on litigation propensity and that these effects are higher for small firms. Empirical analysis provides evidence for the hypotheses. In the second chapter, I examine the appropriation hazards inherent in strategic alliances. Adopting a network perspective, I develop and test a theoretical framework that predicts when knowledge appropriation is likely to occur between partners. I show that different types of embeddedness in the network (relational, structural or positional) affect the likelihood that firms will engage in knowledge appropriation and litigious behavior. I also show that, not only is the competitive environment between a firm and its partner relevant (in that firms are more likely to sue each other if they are competitors), but that the competitive environment of all firms in the network affects litigation hazard. The third chapter investigates whether small firms are at a disadvantage in seeking to enforce patents and whether an aspect of the market for innovation, the trading of patents, helps small firms to overcome difficulties in enforcement. The first part examines whether small firms are more likely to litigate their patents and whether lawsuit durations are greater than large firms, establishing that small firms do incur a disproportionately large burden of cost in protecting their intellectual property. I extend previous work in this area by considering case outcomes and differences across industries. I then examine whether traded patents by small firms to large firms are more likely to be litigated, and find that the market for innovation in the form of patent trades is associated with increased litigation.Business, Sauder School ofGraduat