So Sue Me! The Value Implication of Patent Litigation
51 Pages Posted: 21 Dec 2017 Last revised: 11 Jun 2018
Date Written: May 29, 2018
Using patent lawsuit data from 2000 to 2014, we find that firms with litigated patents and their adversaries experience significantly positive stock returns ranging between 0.31% 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: Suggested Citation