Valuing Patents on Market Reaction to Patent Infringement Litigations

Authors: Yu J. Chiu, Chia H. Yeh

Abstract:

Innovation is more important in any companies. However, it is not easy to measure the innovation performance correctly. Patent is one of measuring index nowadays. This paper wants to purpose an approach for valuing patents based on market reaction to patent infringement litigations. The interesting phenomenon is found from collection of patent infringement litigation events. That is if any patent litigation event occurs the stock value will follow changing. The plaintiffs- stock value raises some percentage. According to this interesting phenomenon, the relationship between patent litigation and stock value is tested and verified. And then, the stock value variation is used to deduce the infringed patents- value. The purpose of this study is providing another concept model to evaluate the infringed patents. This study can provide a decision assist system to help drafting patent litigation strategy and determine the technology value

Keywords: Patent valuation, infringement litigations, stock value, artificial neural networks.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1075254

References:

[1] Arthur Anderson & Co., The Valuation of Intangible AssetsÔÇöSpecial Report No. P254, The Economist Intelligence Unit, London, 1992.
[2] P. Thomas, "A relationship between technology indicators and stock market performance," Scientometrics, vol. 51, no. 1, pp. 319-333, 2001.
[3] D. Somaya, "Strategic determinants of decisions not to settle patent litigation," Strategic Management Journal, vol. 24, pp. 17-38, 2003.
[4] E. Andrews, "Texas instrument loses in Japanese ruling," New York Times, September 1, 1994.
[5] E.F Sherry and D.J. Teece, "Royalties, evolving patent rights, and the value of innovation," Research Policy, vol. 33, pp. 179-191, 2004.
[6] M. Kanellos, "Rambus shares plunge on talk of trial ruling, " CNET News, March 15, 2001; http://news.cnet.com/news/0-1003-200-5148431.html (30% 1-day fall).
[7] S. Van Triest and W. Vis, "Valuing patents on cost-reducing technology: A case study", International Journal of Production Economics, vol. 105, pp. 282-292, 2007.
[8] N. Rutter, "The great patent plague," Forbes, pp. 58-66, Mar. 29, 1993.
[9] S. Bhagat, J. A. Brickley and J. L. Coles: "The Wealth Effects of Interfirm Lawsuits," Journal of Financial economic, vol. 35, pp.221-247, 1994.
[10] P.S. Koku, A.A. Qureshi and A. Akhigbe, "The effects of news on initial corporate lawsuits," Journal of Business Research, vol. 53, pp. 49-55, 2001.
[11] J. R. Allison, M. A. Lemley, K. A. Moore and R. D. Trunkey, "Valuable patents," Georgetown Law Journal , vol. 92, pp. 435-479, 2004.
[12] Lai, Yi-Hsuan, Che, Hui-Chung and Wang, Szu-Yi, Managing Patent Legal Value via Fuzzy Neural Network incorporated with Factor Analysis, In: Proceedings of WiCOM 2008: Engineering, Services and Knowledge Management Track (EMS 2008), Dalian, China, 15-17 Oct. 2008.
[13] P. Hanel, "Intellectual property rights business management practices: A survey of the literature," Technovation, vol. 26, pp. 895-931, 2006.
[14] I. Cockburn and Z. Griliches, "Industry effects and appropriability measures in the stock market-s valuation of R&D and patents," American Economic Review, vol. 78, no. 2, pp. 419-423, 1988.
[15] J. O. Lanjouw and M. Schankerman, "Stylized Facts of Patent Litigation: Value, Scope and Ownership," NBER Working Paper, no. 6297, 1997.
[16] J. O. Lanjouw, A. Pakes and J. Putnam, "How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data," Journal of Industrial Economics, vol. 46, no. 4, pp. 405-433, 1998.
[17] J. O. Lanjouw, "Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value," The Review of Economic Studies, vol. 65, pp. 671-710, 1998.
[18] J. O. Lanjouw and M. Schankerman, "Characteristics of Patent Litigation: A Window on Competition," The Rand Journal of Economics, vol. 32, no. 1, pp. 129-151, 2001.
[19] S. Bhagat, and R. Romano: "Events Studies and the Law: Part I : Technique and Corporate Litigation," American Law and Economic Review, vol. 4, pp. 141-168, 2002.
[20] M. Hirschey and V. J. Richardson, "Are scientific indicators of patent quality useful to investors," Journal of Empirical Finance, vol.11, no. 1, 91-107, 2004.
[21] M. Reitzig, "Improving patent valuations for management purposes - validating new indicators by analyzing application rationales," Research Policy, vol. 33, no. 6-7, pp. 938-957, 2004.
[22] M. Reitzig, J. Henkel, and C. Heath, "On sharks, trolls, and their patent prey - unrealistic damage awards and firms' strategies of being infringed," Research Policy, vol. 36, no. 1, pp. 134-154, 2007.
[23] T. S. Raghu, W. Woo, S. B. Mohan and H. R. Rao, "Market reaction to patent infringment litigations in the information technology industry," Inf Sys Front, Vol. 10, pp. 61-75, 2008.
[24] Y. J. Chiu and Y. W. Chen, "Using AHP in patent valuation", Mathematical and Computer Modeling, vol. 46, no. 7-8, pp. 1054-1062, 2007.
[25] E. Masson and Y. J. Wang, "Introduction to computation and learning in artificial neural networks," European Journal of Operational Research, vol. 47, pp. 1-28, 1990.
[26] D.E. Rumelhart, G.E. Hinton and R.J. Williams, "Learning internal representations by error propagation," in: D.E. Rumelhart and J.L. McClelland (Eds.), Parallel Distributed Processing, Explorations into the Microstructure of Cognition, Vol. 1, pp. 318-362. Cambridge, MA: MIT Press, 1986.
[27] Y. Chauvin, and D. E. Rumelhart (Eds.), "Backpropagation: theory, architectures and applications," Hillsdale, NJ: Erlbaum, 1995.
[28] P.D. Wasserman, "Neural computing: theory and practice," New York: Van Nostrand Reinhold, 1989.
[29] J.-S. R. Jang, C.-T. Sun and E. Mizutani, Neuro-fuzzy and soft computing, Prentice-Hall International, Inc, 1997.
[30] K. Hornik, M. Stinchcombe and H. White "Multilayer feedforward networks are universal approximators," Neural Networks, vol. 2, pp. 359-366, 1989.
[31] K. A. Krycha and U. Wagner, "Applications of artificial neural networks in management science: a survey," Journal of Retailing and Consumer Services, vol. 6, pp. 185-203, 1999.