Effects of patent protection on the firms' market value

Abstract

Patent protection serves as a powerful tool for preventing imitation of technologies from rivals. For that reason, firms establish several strategies to protect their patents when they apply them. However, backward citation and patent family size have not been considered in previous studies while they are important patent protection strategies for firms. In this paper, we examine how backward citation and patent family size can inhibit patent invalidation suits and be used as strategies to defend patents around the world. Especially, we examine the effects of these patent protection strategies on firms’ mar-ket value focusing on the renewable energy sector in South Korea. We find that these two patent protec-tion strategies have significant effects on firms’ market values proving that they are important tools in protecting patents. In addition, our findings suggest that protecting firms’ own intellectual property is an important factor for improving their market values, especially, in the renewable energy industry.