The influence of strategic patent litigation on firm performance

Firms accumulate patents to protect their innovations from imitation. However, patents only provide the option to go to court against infringers. To exclusively benefit from their innovations, firms have to enforce their patents by filing a lawsuit. While previous research concentrated on the determinants and non-financial outcomes of patent litigation, this dissertation examines its effects on firm performance. Strategic patent litigation is very costly, but it can also enable the plaintiff to exclude competitors from the market and increase sales. However, not all firms are equally capable of benefitting from this trade-off. Hence, there is a need to examine the contingencies that influence the effectiveness of firms in generating profit from patent litigation. To fill this gap, this dissertation sheds light on organisational, industrial and institutional contingencies by looking at the repeated use of the same legal personnel, multi- and single invention industry factors, and the institutional targeting decisions of organisations. Therefore, this thesis contributes by highlighting the abilities of a firm to create barriers against imitation and the contingencies that can explain why some firms are unable to appropriate value from their innovations.
The analysis of panel data on litigation activities of U.S. manufacturing corporations matched with financial data showed that patent litigation can increase administrative costs and profitability but does not influence sales per se. These findings imply that firm-specific abilities can build imitation barriers which are traditionally thought to stem from asset characteristics. The moderating effects clarify that patent litigation negatively affects sales and profitability while firms significantly save costs if they rely on repeated legal representation, operate in single invention industries, and litigate repeatedly in the same courts. Thereby, this study differentiates from previous research by concentrating empirically on different measures of performance and firm-specific, industrial and institutional characteristics that nurture value creation from strategic patent litigation.