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http://ssrn.com/abstract=2278255
 
 

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The Costs and Benefits of United States Patents


James E. Bessen


Boston University - School of Law; Research on Innovation

Peter Neuhäusler


Fraunhofer Institute for Systems and Innovation Research ISI ; Berlin Universtity of Technology

John L. Turner


University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Jonathan W. Williams


University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

February 2014

Boston Univ. School of Law, Public Law Research Paper No. 13-24
Boston Univ. School of Law, Law and Economics Research Paper No. 13-24

Abstract:     
We use a detailed data set to estimate the private costs and private benefits of United States patents owned by publicly-held firms. To estimate these costs, we combine data from Derwent Litalert with a proprietary dataset of non-practicing entity (NPE) lawsuits collected by Patent Freedom, and use an event-study approach to estimate losses suffered by alleged infringers during 1984-2009. To estimate these benefits, we combine patent data from the USPTO and EPO with financial data from CRSP and COMPUSTAT, and use market-value regressions to estimate the value of patent rents for publicly-traded US firms during 1979-2002. We find that private costs exceed private benefits overall and that the gap between these costs and benefits has grown across time. Surges in the number of NPE lawsuits, lawsuits filed over Computers/Communications patents, and lawsuits brought against non-manufacturing, software and telecommunications firms contribute to the increase in the gap. Growth in private costs outstrips growth in lawsuits, in part, because events in these fast-growing categories have higher-than-average per-event dollar costs.

Number of Pages in PDF File: 51

Keywords: event study, market-value regression, patent, litigation, non-practicing entities, research and development

JEL Classification: K2, O3

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Date posted: June 12, 2013 ; Last revised: February 24, 2014

Suggested Citation

Bessen, James E. and Neuhäusler, Peter and Turner, John L. and Williams, Jonathan W., The Costs and Benefits of United States Patents (February 2014). Boston Univ. School of Law, Public Law Research Paper No. 13-24; Boston Univ. School of Law, Law and Economics Research Paper No. 13-24. Available at SSRN: http://ssrn.com/abstract=2278255 or http://dx.doi.org/10.2139/ssrn.2278255

Contact Information

James E. Bessen (Contact Author)
Boston University - School of Law ( email )
765 Commonwealth Avenue
Boston, MA 02215
United States
Research on Innovation ( email )
202 High Head Rd.
Harpswell, ME 04079
United States
617-531-2092 (Phone)
Peter Neuhäusler
Fraunhofer Institute for Systems and Innovation Research ISI ( email )
Breslauer Str. 48
Karlsruhe, 76139
Germany
Berlin Universtity of Technology ( email )
Straße des 17
Berlin
Germany
John L. Turner
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )
Athens, GA 30602-6254
United States
Jonathan W. Williams
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )
Athens, GA 30602-6254
United States
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