Spillover Effects of Patent Litigation Initiated by Non-Practicing Entities: Evidence from the Capital Market

61 Pages Posted: 12 Dec 2019

See all articles by Feng Chen

Feng Chen

University of Toronto - Rotman School of Management

Yu Hou

Queen's University - Smith School of Business

Gordon Richardson

University of Toronto

Date Written: November 14, 2019

Abstract

We analyze the potential spillover effects from patent-infringement litigation initiated by non-practicing entities (NPEs). When a firm is sued by NPEs, its at-risk technology peers also experience significant market value losses around the litigation filing date, losses that are much greater than those around patent litigations initiated by practicing entities. We also show that state anti-troll laws mitigate the spillover effects. Technology peers that are not subsequently sued by NPEs experience negative operational impacts, including a decline in R&D innovation efficiency following NPE litigations. Overall, our evidence suggests that there are more big losers from NPE litigation than what has been identified in the existing NPE litigation literature.

Keywords: Spillover Effects; Patent-Infringement Litigation; Non-Practicing Entities; Technology Peers

JEL Classification: G14; O34; O32; M41; K11

Suggested Citation

Chen, Feng and Hou, Yu and Richardson, Gordon, Spillover Effects of Patent Litigation Initiated by Non-Practicing Entities: Evidence from the Capital Market (November 14, 2019). Available at SSRN: https://ssrn.com/abstract=3492471 or http://dx.doi.org/10.2139/ssrn.3492471

Feng Chen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Yu Hou (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Gordon Richardson

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

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