The Innovation Consequences of Judicial Efficiency

We examine how judicial system efficiency shapes corporate innovation by exploiting the Patent Pilot Program enacted by Congress in 2011. Aiming to improve judicial efficiency of patent litigation, the pilot program allows judges with more relevant experience and expertise to preside over more patent cases in the 13 pilot district courts, thus effectively shortening the case durations. Using a difference-in-differences design, we find that an improvement in judicial efficiency significantly encourages innovation, especially explorative innovation in new technology domains or based on new knowledge. Judicial efficiency has more pronounced benefits on firms that are intensively exposed to litigation and firms with constrained resources for litigation. Our findings speak to the fundamental but underemphasized role of judicial efficiency in vitalizing the patent system