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The private value of software patents

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  • Hall, Bronwyn H.
  • MacGarvie, Megan

Abstract

We investigate the value creation or destruction associated with the introduction of software patents in the United States in two ways. The first looks at the cumulative abnormal returns to Information and Communication Technology (ICT) firms around the time of important court decisions that impacted software patents, and the second analyzes the relationship between firms' stock market value, the sector in which they operate, and their holdings of software patents. We conclude that the market evaluated software patents as a negative development ex ante. Ex post, a greater number of firms in all ICT sectors invested in these patents, and these firms had slightly higher market values than those with no software patents. However, while we obtain clear evidence that the technological importance or quality of patented innovation mattered for the market value of hardware firms both before and after the legal changes, it is less clear that the marginal patent right per se was associated with increases in market value, and there are no significant valuation effects associated with patents for pure software firms after the change.

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Bibliographic Info

Article provided by Elsevier in its journal Research Policy.

Volume (Year): 39 (2010)
Issue (Month): 7 (September)
Pages: 994-1009

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Handle: RePEc:eee:respol:v:39:y:2010:i:7:p:994-1009

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Web page: http://www.elsevier.com/locate/respol

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Keywords: Software patents Intellectual property rights Patent value;

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References

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  1. Bronwyn H. Hall, 2003. "Business Method Patents, Innovation, and Policy," NBER Working Papers 9717, National Bureau of Economic Research, Inc.
  2. Layne-Farrar, Anne, 2005. "Defining Software Patents: A Research Field Guide," Working paper 143, Regulation2point0.
  3. Iain M. Cockburn & Megan J. MacGarvie, 2006. "Entry and Patenting in the Software Industry," NBER Working Papers 12563, National Bureau of Economic Research, Inc.
  4. repec:cup:cbooks:9780521684156 is not listed on IDEAS
  5. Hall, Bronwyn H. & Graham, Stuart J. H. & Harhoff, Dietmar & Mowery, David C., 2003. "Prospects for Improving U.S. Patent Quality via Post-grant Opposition," Department of Economics, Working Paper Series qt8fg5b6bs, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Michael Noel & Mark Schankerman, 2006. "Strategic Patenting and Software Innovation," CEP Discussion Papers dp0740, Centre for Economic Performance, LSE.
  7. Michael Noel & Mark Schankerman, 2006. "Strategic Patenting and Software Innovation," STICERD - Economics of Industry Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  8. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
  9. James Bessen & Robert M. Hunt, 2004. "An empirical look at software patents," Working Papers 03-17, Federal Reserve Bank of Philadelphia.
  10. Noel, Michael D. & Schankerman, Mark, 2006. "Strategic Patenting and Software Innovation," CEPR Discussion Papers 5701, C.E.P.R. Discussion Papers.
  11. Austin, David H, 1993. "An Event-Study Approach to Measuring Innovative Output: The Case of Biotechnology," American Economic Review, American Economic Association, vol. 83(2), pages 253-58, May.
  12. Robert M. Hunt, 2001. "You can patent that? Are patents on computer programs and business methods good for the new economy?," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 5-15.
  13. Salinger, Michael, 1992. "Standard Errors in Event Studies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 39-53, March.
  14. Bronwyn Hall, 2004. "Exploring the patent explosion," ESRC Centre for Business Research - Working Papers wp291, ESRC Centre for Business Research.
  15. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
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