Minyuan Zhao

Abstract

For multinational enterprises (MNEs) facing global competition, home bias in patent courts is a double-edged sword. An MNE may receive a favorable verdict from the home court, but this verdict is binding only in the home country. Meanwhile, the foreign opponents may attribute the result to home bias (instead of true merit) and seek additional draw in other countries, reducing the likelihood of a global settlement. Thus, our understanding of firms’ global litigation strategies calls for a comprehensive analysis of the existence and effects of home bias. Using a large sample of infringement and invalidity cases in 61 countries from 2005 to 2017, we first construct a home bias index for each country, and then analyze the effect of perceived and actual home bias on the response of global litigants. Interestingly, after controlling for the underlying technologies, litigating parties, and country characteristics, we find limited evidence of actual home bias. However, we find evidence that firms indeed respond to perceived home bias—a simple winning rate of locals vs. foreigners. If foreign litigants lose in a court with perceived home bias, we are more likely to observe follow-up cases in other countries involving the same patent family or litigating parties in the near future. In that sense, even if home bias is mostly a myth, it has real effect on firms’ litigation decisions.