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The Market Effects of Patent Litigation

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DOI: 10.4236/ti.2013.41007    5,341 Downloads   7,575 Views   Citations

ABSTRACT

This study measures the value of patents to firms and identifies factors that contribute to that value by observing the abnormal change in firms stock market values following court decisions. Firms lose 0.85% (about $19 million) of their value following a decision that one of their patents is “Invalid”, but only gain about 0.7% following a Valid & Infringed decision. The factors that that affect the expectations of investors as to the enforceability of patent rights are at least as important in determining the contribution of the patent to the firms market value as are characteristics of the patent. Most prominently, this confirms the substantial impact that the creation of the Court of Appeals for the Federal Circuit (CAFC) had on the value of patents. After the creation of the CAFC, “Invalid” decisions resulted in a 0.7% (about $15.5 million) greater loss of firm value. Clearly, patents are more valuable because of this change in the legal landscape.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

M. Henry, "The Market Effects of Patent Litigation," Technology and Investment, Vol. 4 No. 1, 2013, pp. 57-68. doi: 10.4236/ti.2013.41007.

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