The Value of Legal Protection of Novel Product Designs: Evidence from Egyptian Goddess v. Swisa

Abstract

In this paper, we empirically examine how the strengthened legal protection of novel designs prevents mimicking behaviors and thus enhances the economic value of novel designs and their assignees. We use the decision of the Federal Circuit Court of Appeals in Egyptian Goddess, Inc. v. Swisa, Inc. as an unexpected regulation change that prevented accused infringers from using the “point-of-novelty” test to defend themselves, which enhanced the protection of design patents, especially intricate ones. After this decision, we show that intricate designs are better protected than simple designs and are less mimicked by subsequent designs. Moreover, we show that stock market reactions to grants of intricate design patents are significantly more positive than reactions to grants of simple design patents after this decision. Finally, we show that such positive reactions are more pronounced among firms facing fiercer product market competition and among firms previously involved in design patent litigation.