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Growth of Firms under Injunction Risk

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175

Abstract

Although injunctions serve as a crucial remedy for intellectual property protection, their excessive use has the potential to limit economic growth. We use the 2006 Supreme Court ruling in eBay v. MercExchange, which reduced injunction likelihood for defendants in cases related to information and communications technology patents, as a shock to injunction risk. These defendants launched more new products and became more profitable after the ruling. The increase in treated firms’ new product development became more pronounced for firms with more limited financing sources, consistent with a financing channel for hese results. Moreover, treated firms’ increased profitability is concentrated in firms with less product diversity, under more litigation risk, and under more intensive product-market competition.

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