Mezzanotti and Simcoe on eBay and Innovation

Filippo Mezzanotti and Timothy Simcoe have published a paper titled Patent policy and American innovation after eBay: An empirical examination, 48 Research Policy 1271-81 (2019).  Here is a link to the paper and here is the abstract:

The 2006 Supreme Court ruling in eBay vs. MercExchange removed the presumption of injunctive relief from infringement and marked a sea change in U.S. patent policy. Subsequent legal and policy changes reduced the costs of challenging patent validity and narrowed the scope of patentable subject matter. Proponents of these changes argue that they have made the U.S. patent system more equitable, particularly for sectors such as information technology, where patent ownership is fragmented and innovation highly cumulative. Opponents suggest the same reforms have weakened intellectual property rights and curtailed innovation. After reviewing the legal background and relevant economic theory, we examine patenting, R&D spending, venture capital investment and productivity growth in the wake of the eBay decision. Overall, we find no evidence that changes in patent policy have harmed the American innovation system.

The paper also links to a draft paper by Mezzanotti titled Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D.  Here is a link to that paper, and here is the abstract:

Using a difference-in-difference design around the Supreme Court decision “eBay v. MercExchange,” I examine how patent enforcement affects corporate R&D. To identify the effects of the decision, I compare innovative activity across firms differentially exposed to patent litigation before the ruling. Across several measures, I find that the decision led to a general increase in innovation. This result confirms that the changes in enforcement induced by the ruling reduced some of the distortions caused by patent litigation. Exploring the channels, I show that patent litigation negatively affects investment because it lowers the returns from R&D and exacerbates its financing constraints.

These appear to be some important findings, which should inform the debate on the wisdom of mandatory versus discretionary injunctive relief.