Are Litigated Patents More Valuable? The Case of LEDs

Recently the LED sector has been going through a period of rapid technological change and intensive competition. In rapidly growing technological systems, incumbent firms use a range of intellectual property rights (IPR)-related strategies to gain competitive advantage. This is often accompanied by an increased number of patent lawsuits, which signals a strong IPR regime and can be detrimental to innovation as previously shown for various sectors. In this article we examine the nature of LED-related litigated and non-litigated patents and explore the main drivers of patent lawsuits. From our analysis we obtain four results. First, litigated LED patents are of significantly higher quality compared to non-litigated ones. Second, even though the quality of defended patents is high, two leading plaintiffs are non-practicing entities. Third, litigations generally occur between incumbent firms. Fourth, the 2005 US Energy Policy Act seems to have reshaped the dynamics of innovation in the sector. We discuss the implications of these results with respect to the literature on the effect of litigations on innovation in general, and on eco-innovations in particular.