Impact of Patent Infringement Litigation on the Subsequent Patenting Behavior of Plaintiffs from Small and Medium Enterprises

Patent systems have been established as an incentive for innovation in most countries of the world. However, small and medium enterprises (SMEs) typically have little experience and expertise in using such systems. This paper examines the impact of Japanese patent infringement litigation on the subsequent patenting behavior of plaintiff SMEs. Our results show that SMEs tend to file lower numbers of patent applications but gain stronger patent rights after experiencing patent infringement litigation as plaintiffs. This suggests that SMEs learn to manage their patent applications after experiencing patent litigation as plaintiffs. Furthermore, we also find that the high costs to of patent litigation lead to a subsequent decrease in both patent application counts and the maximum number of forward citations of granted patents after litigation. This suggests that the high costs of patent litigation impose such a great burden on plaintiff SMEs that their regular research and development (R&D) activities are negatively impacted.