Patent Enforcement, Shareholder Value, and Firm Innovations: Evidence from the Supreme Court Ruling on TC Heartland (2017)

37 Pages Posted: 24 Oct 2020

See all articles by Andy Law

Andy Law

Harvard University, Harvard Law School, Harvard University, Harvard Law School, Students; Board of Governors of the Federal Reserve System

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Teng Wang

Board of Governors of the Federal Reserve System

Date Written: July 1, 2020

Abstract

This paper studies the impact of patent enforcement on shareholder value and firms’ innovation patterns. Using the landmark U.S. Supreme Court case TC Heartland LLC vs. Kraft Foods Group Brands LLC (2017), which significantly constrained the forum shopping practices in patent litigation, we find that the weakening of patent holders’ ability to enforce intellectual property protection leads to more negative stock return reactions for firms that are more innovation-intensive before the ruling. We further find that weakened enforcement of patent protection shifted firms’ innovation patterns. While innovation-intensive firms do not reduce the overall R&D investment, they choose to keep their innovation outputs as trade secrets and apply for patents significantly less frequently. Our findings shed new light on the current debate on intellectual property protection.

Keywords: Patent Enforcement, Shareholder Value, Firm Innovation Activities

JEL Classification: D2, K1, O31, G20

Suggested Citation

Law, Andy and Qiu, Buhui and Wang, Teng, Patent Enforcement, Shareholder Value, and Firm Innovations: Evidence from the Supreme Court Ruling on TC Heartland (2017) (July 1, 2020). Harvard Business Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3687058 or http://dx.doi.org/10.2139/ssrn.3687058

Andy Law

Harvard University, Harvard Law School, Harvard University, Harvard Law School, Students ( email )

United States

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Buhui Qiu

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Teng Wang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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