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The Value of Certainty in Intellectual Property Rights: Stock Market Reactions to Patent Litigation

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Abstract

Using a sample of patents litigated between 1977 and 1997, I estimate stock market reactions to patent litigation decisions and to patent grants. I find that the resolution of uncertainty over validity and infringement is worth as much to the firm as the initial patent right. Each is worth about 1 to 1.5% excess returns. Additionally, I find that there are significant differences pre and post-1982 with the establishment of the Court of Appeals for the Federal Circuit. I also find that there are significant differences in reactions for plaintiff patent-holders and defendant patent-holders. Interestingly, there is no similar effect for appellate court decisions relative to the district court. To my knowledge, this is the first study that measures the stock market reactions to legal outcomes of patent cases.

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  • Marco, Alan C., 2006. "The Value of Certainty in Intellectual Property Rights: Stock Market Reactions to Patent Litigation," Vassar College Department of Economics Working Paper Series 82, Vassar College Department of Economics.
    • Handle: RePEc:vas:papers:82
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    Cited by:

    1. Panattoni, Laura E., 2011. "The effect of Paragraph IV decisions and generic entry before patent expiration on brand pharmaceutical firms," Journal of Health Economics, Elsevier, vol. 30(1), pages 126-145, January.
    2. Junbyoung Oh & Zhen Sun & Kineung Choo, 2023. "Financial Market Reactions to Patent Litigation: An Event Study of Litigation in Korea," Korean Economic Review, Korean Economic Association, vol. 39, pages 175-203.
    3. Bryan Engelhardt & Zachary Fernandes, 2016. "An Event Study of Patent Verdicts and Judicial Leakage," Working Papers 1602, College of the Holy Cross, Department of Economics.

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