Market reaction to patent infringement litigations in the information technology industry

Raghu Santanam, Wonseok Woo, S. B. Mohan, H. Raghav Rao

Research output: Contribution to journalArticle

36 Citations (Scopus)

Abstract

Intellectual property portfolios that include unique inventions and discoveries are potentially inimitable resources that provide strategic leverage to Information Technology (IT) firms. The increasing patent related litigations in the IT industry, and the high costs associated with litigations make this an economically significant activity. Taking a market oriented view to this issue we investigate the economic impact of patent infringement litigation on both the plaintiff and the defendant firms in IT industry. Event study methodology is used to assess the effect of the litigation on the stock market returns around the date of litigation announcement as well as the date of settlement/ termination. Our results suggest that the news of patent infringement litigation was unfavorably accepted in the stock market for the defendants. On the other hand, abnormal returns for plaintiff firms around litigation announcement date as well as settlement/termination date were significantly positive. We find evidence to the effect that patent litigations are not zero-sum games since combined abnormal returns for the plaintiff and defendant firms are negative. Patents belonging to the electronic and electric categories are more likely to influence market returns, whereas computer and communications patent categories are less likely to do so. Patent importance (as measured by patent citations) is found to be an important contributor to market's evaluation of a patent litigation's impact.

Original languageEnglish (US)
Pages (from-to)61-75
Number of pages15
JournalInformation Systems Frontiers
Volume10
Issue number1
DOIs
StatePublished - Mar 2008

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Patents
Information Technology
Information technology
Industry
Date
Intellectual property
Patents and inventions
Stock Market
Termination
Economics
Communication
Likely
Market
Costs
Intellectual Property
Zero sum game
Citations
Leverage
Financial markets
Electronics

Keywords

  • Event study
  • Intellectual property
  • IT innovations
  • Litigations
  • Patents

ASJC Scopus subject areas

  • Information Systems
  • Theoretical Computer Science
  • Computational Theory and Mathematics

Cite this

Market reaction to patent infringement litigations in the information technology industry. / Santanam, Raghu; Woo, Wonseok; Mohan, S. B.; Rao, H. Raghav.

In: Information Systems Frontiers, Vol. 10, No. 1, 03.2008, p. 61-75.

Research output: Contribution to journalArticle

Santanam, Raghu ; Woo, Wonseok ; Mohan, S. B. ; Rao, H. Raghav. / Market reaction to patent infringement litigations in the information technology industry. In: Information Systems Frontiers. 2008 ; Vol. 10, No. 1. pp. 61-75.
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