John L. Turner (University of Georgia – C. Herman and Mary Virginia Terry College of Business – Department of Economics), James E. Bessen (Boston University – School of Law; Research on Innovation), Peter Neuhausler (Fraunhofer Institut für Systemtechnik und Innovationsforschung), & Jonathan W. Williams (University of Georgia – C. Herman and Mary Virginia Terry College of Business – Department of Economics) have posted The Costs and Bene fits of United States Patents on SSRN. Here is the abstract:
-
We use a detailed data set to estimate the costs and benefits of United States patents. To estimate costs, we combine data from Derwent Litalert with a proprietary dataset of non-practicing entity (NPE) lawsuits collected by Patent Freedom, and use an event study approach to estimate losses suffered by alleged infringers during 1984-2009. To estimate benefits, we combine patent data from the USPTO and EPO with financial data from CRSP and COMPUSTAT, and use market-value regressions to estimate the value of patent rents for publicly-traded US firms during 1979-2002. We find that costs exceed benefits overall and that the gap between costs and benefits has grown across time. Surges in the number of NPE lawsuits, lawsuits filed over Computers/Communications patents, and lawsuits brought against non-manufacturing, software and telecommunications firms contribute to the increase in the gap. Growth in costs outstrips growth in lawsuits, in part, because events in these fast-growing categories have higher-than-average per-event dollar costs.