This study investigates the causal effect of intangible capital on leverage. We use court invalidations of patents by the U.S. Court of Appeals for the Federal Circuit as a proxy for reductions in intangible capital and mitigate endogeneity concerns by exploiting random assignment of judges to court cases. Using an instrumental variable research design, we show that a loss of intangible capital causes a reduction in a firm’s leverage. The effect is stronger for firms with low interest coverage, high proximity to default and small firm size, and if an invalidated patent is pledged as collateral.