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Trends in private patent costs and rents for publicly-traded United States firms

: Bessen, James E.; Neuhäusler, Peter; Turner, John L.; Williams, Jonathan


International review of law and economics 56 (2018), S.53-69
ISSN: 0144-8188
Fraunhofer ISI ()
event study; market-value regression; Patent; Litigation; non-practicing entities; research and development

We use detailed data to estimate the private costs and private rents of United States patents for publicly-traded firms. In analyzing costs, we first introduce a novel theoretical model to interpret our estimates. We then combine lawsuit data from Derwent Litalert with non-practicing entity (NPE) lawsuits collected by Patent Freedom, and use an event-study approach to estimate losses suffered by alleged infringers during1984–2009. To estimate rents, we combine patent data from the USPTO and EPO with financial data from COMPUSTAT, and use market-value regressions to estimate the value of patent rents for publicly-traded US firms during 1979–2002. We find that private costs exceed private rents during 1999–2000 and the trend in costs is sharply higher. Costs also exceed forecasts of rents for 2005–09. A surge in the number of NPE lawsuits contributes to the increase in the gap.