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The private value of software patents

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Author Info

  • 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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For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

Related research

Keywords: Software patents Intellectual property rights Patent value;

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References

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  1. Bronwyn H. Hall & Stuart J. H. Graham & Dietmar Harhoff & David C. Mowery, 2004. "Prospects for Improving U.S. Patent Quality via Post-grant Opposition," Law and Economics 0401002, EconWPA.
  2. Iain M. Cockburn & Megan J. MacGarvie, 2011. "Entry and Patenting in the Software Industry," Management Science, INFORMS, vol. 57(5), pages 915-933, May.
  3. repec:cdl:compol:4996 is not listed on IDEAS
  4. Hall, Bronwyn H., 2003. "Business Method Patents, Innovation, and Policy," Competition Policy Center, Working Paper Series qt66w6p7qz, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  5. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," The Journal of Technology Transfer, Springer, vol. 30(2_2), pages 35-48, 01.
  6. 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.
  7. repec:cdl:econwp:4979 is not listed on IDEAS
  8. Layne-Farrar, Anne, 2005. "Defining Software Patents: A Research Field Guide," Working paper 143, Regulation2point0.
  9. 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.
  10. repec:cup:cbooks:9780521684156 is not listed on IDEAS
  11. 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.
  12. Salinger, Michael, 1992. "Standard Errors in Event Studies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(01), pages 39-53, March.
  13. Suzanne Scotchmer, 1996. "Protecting Early Innovators: Should Second-Generation Products Be Patentable?," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 322-331, Summer.
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