So Sue Me! The Value Implication of Patent Litigation

57 Pages Posted: 21 Dec 2017 Last revised: 1 Aug 2018

Frederick L. Bereskin

University of Missouri

Po-Hsuan Hsu

University of Hong Kong

William R. Latham

University of Delaware - Department of Economics

Huijun Wang

University of Delaware

Date Written: July 23, 2018

Abstract

Using comprehensive patent lawsuit data from 2000 to 2014, we find that firms with litigated patents and their adversaries experience positive stock returns ranging between 0.25% and 1.18% in the 10 or 24 days following litigation announcements. In addition, portfolios consisting of firms involved in patent lawsuits generate risk-adjusted alphas between 0.56% to 0.75% per month in the following year. Further analysis on firms’ future profitability and their competition suggests that our finding of positive, yet undervalued, effects of patent litigation on stock prices could be explained by investors’ underreaction.

Keywords: Patent Litigation, Stock Returns, Information Delay, Underpricing

JEL Classification: G11, G14, O34

Suggested Citation

Bereskin, Frederick L. and Hsu, Po-Hsuan and Latham, William R. and Wang, Huijun, So Sue Me! The Value Implication of Patent Litigation (July 23, 2018). Available at SSRN: https://ssrn.com/abstract=3090551 or http://dx.doi.org/10.2139/ssrn.3090551

Frederick L. Bereskin (Contact Author)

University of Missouri ( email )

Columbia, MO 65203
United States

Po-Hsuan Hsu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong
China

William R. Latham

University of Delaware - Department of Economics ( email )

Newark, DE 19716
United States
302-731-1464 (Phone)
302-831-6968 (Fax)

Huijun Wang

University of Delaware ( email )

B & E Finance, UD
306 Purnell Hall
NEWARK, DE Delaware 19716
United States

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