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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.

Suggested Citation

  • Hall, Bronwyn H. & MacGarvie, Megan, 2010. "The private value of software patents," Research Policy, Elsevier, vol. 39(7), pages 994-1009, September.
  • Handle: RePEc:eee:respol:v:39:y:2010:i:7:p:994-1009
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    References listed on IDEAS

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    1. Michael Noel & Mark Schankerman, 2013. "Strategic Patenting and Software Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 61(3), pages 481-520, September.
    2. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    3. Hall, Bronwyn H., 2003. "Business Method Patents, Innovation, and Policy," Department of Economics, Working Paper Series qt2n24f63d, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    More about this item

    Keywords

    Software patents Intellectual property rights Patent value;

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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