The Impact of Judicial Verdicts Regarding Patent Litigation on Stock Prices

• Název práce v češtině: Vliv soudních rozsudků v patentových sporech na ceny akcií
• Název v anglickém jazyce: The Impact of Judicial Verdicts Regarding Patent Litigation on Stock Prices
• Klíčová slova: Cena akcie, Patenty, Soudní spory ohledně patentů, Soudní rozsudky, Event Study
• Klíčová slova anglicky: Stock Price, Patents, Patent Litigation, Judgements, Event Study
• Akademický rok vypsání: 2013/2014
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. Bc. Jiří Novák, M.Sc., Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 15.05.2014
• Datum zadání: 15.05.2014
• Datum a čas obhajoby: 18.06.2015 08:00
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 14.05.2015
• Datum proběhlé obhajoby: 18.06.2015
• Oponenti: Mgr. Jan Kvaček

Předběžná náplň práce

1) The characterisation
1a) Targets and motivation
The stock price is affecting by various events and reacts sensitively to economic news, although some events have greater impact on the stock price than others (Chen et al., 1986). The stock price is influence by factors which are related directly to the company as dividend announcement, earning announcement etc. (Aharony & Swary, 1980) as well as factors related to the economy as GDP, inflation etc.
The objective of this bachelor thesis is to show how juridical verdicts can influence stock prices. In our opinion, this theme is interesting because nowadays companies litigate due to various things. In view of this fact we focus only on cases regarding patents, specifically only on trials concerning patent infringement and patent invalidity.
A patent is the government licence which is granted to the holder and which allows the patent-holding company to reach some market power or become even a monopolist in some sector (Bessen, 2009). The possession of patents also contributes to the respective company´s value in financial markets (Sandner & Block, 2011) and so the protection of the company´s own patents against imitation is an important tool to maintain the market power and given market value while legal disputes are a powerful option to enforce the protection.

1b) The hypotheses
This work contains three main hypotheses which confirm or disprove the impact of a patent-related judicial verdict on the patent holder’s stock price and demonstrate the cases in which the impact is most significant.
The first hypothesis is divided into two parts. These two parts examine the impact of judicial verdicts separately for both cases - the case of a victory and the case of a defeat. The second hypothesis tests whether the effect is more significant in case of a trial defeat than in case of a trial victory. The third and the last hypothesis examines whether a juridical verdict concerning patent validity has a bigger impact on the patent holder´s stock price than a juridical verdict concerning patent infringement.

2) The methodology
We use an event study methodology to examine the impact of the judgement on the stock price of the patent holder. This methodology has been widely used in recent literature and is used to test the impact of economic events on the stock price. But it is possible to use this methodology for instance in the law, too.
Basic outline of this methodology is to compute an expected return of the stock price which is possible to be calculated by various methods. Having computing expected return we compute an abnormal return and evaluate the impact on the stock price.

2a) Evaluation
The results of our observations will be discussed within the empirical part and will be presented in tables and graphs.

3) The expected structure
I. Introduction
II. Literature review
a. Patent background
b. Patent-related benefits
c. Patent court
d. Hypotheses
III. Practical part
a. Sample selection, dataset and methodology
b. Results
c. Discussion
IV. Conclusions

4) Basic literature and references
AHARONY, Joseph a Itzhak SWARY. Quarterly Dividend and Earnings Announcements and Stockholders' Returns: An Empirical Analysis. The Journal of Finance [online]. 1980, Vol. 35, No. 1, s. 12 [cit. 2014-05-27]. Available at: http://www.jstor.org/stable/2327176

BESSEN, James. Estimates of patent rents from firm market value. Research Policy [online]. 2009, Vol. 38, No. 10, s. 13 [cit. 2014-05-26]. Available at: http://www.sciencedirect.com/science/article/pii/S0048733309001905#

CHEN, Nai-Fu, Richard ROLL a Stephen A. ROSS. Economic Forces and the Stock Market. The Journal of Business[online]. 1986, Vol. 59, No. 3, s. 21 [cit. 2014-05-26]. Available at: http://www.jstor.org/stable/2352710

SANDNER, Philipp G. a Joern BLOCK. The market value of R&D, patents, and trademarks. Research Policy [online]. 2011, Vol. 40, No. 7, s. 17 [cit. 2014-05-27]. Available at: http://www.sciencedirect.com/science/article/pii/S0048733311000576