The impact of patent litigation on shareholder value in the smartphone industry

Abstract

In recent years, patent lawsuits in the smartphone industry have become a sensitive issue. While numerous studies have investigated the wealth effect of patent and corporate litigation, few have examined cutrent patent litigation in the smartphone industry. This paper investigates the wealth effect of patent lawsuits between Apple and other smartphone manufacturers, such as Samsung and HTC, using an event study method. The empirical results show that a firm in a vantage position in a patent lawsuit experiences a positive stock price return when it sues a rival firm for patent infringement, but one that does not have a vantage position in a patent lawsuit experiences a negative stock price return when sued by a rival firm. The results also show that in contrast to the general findings, Apple experienced negative stock returns regardless of its litigation position when it fought Nokia, but it did not experience any abnormal stock return regardless of its litigation position in disputes with Asian firms. However, consistent with the general findings, Asian firms experienced negative stock returns when they were sued by Apple.