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Entrepreneurship and Innovation Policy Research Seminar - Shivaram Devarakonda
Shiv will present "Probabilistic Patents and Venture Capital Financing: Evidence from the Biopharmaceutical Industry" (with V Chila).
Abstract: Patents play an important part in startups’ success. The rights associated with patents are often probabilistic because patents’ can be challenged in courts for the validity of their scope. We study the effect of uncertainty about the scope of startups’ patents on their ability to attract Venture Capital (VC) financing. This effect has been difficult to study because of the challenges in measuring scope. We overcome this challenge by exploiting the context of genomic sequences. Since 1980, the USPTO has allowed patents on nucleotide sequences — the building blocks of the genome. This practice was disturbed in 2010 when the court system intervened in The Association for Molecular Pathology v. Myriad Genetics. Between 2010 and 2013, the lower courts issued a series of contradictory rulings based on inconsistent legal reasoning, casting doubts on the scope of thousands of granted patents on nucleotide sequences. We exploit this intervention to investigate the effects of patent scope uncertainty on VC investments in new biotech ventures. We employ a dataset of new biotech ventures founded between 1995 and 2013. The court system’s intervention motivates a quasi-experimental approach that allows us to show the negative impact of patent scope uncertainty on VC investments in startups owning affected patents.

Jan 25, 2023 11:00 AM in Eastern Time (US and Canada)

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