Events

Prof. Yan Anthea Zhang
Fayez Sarofim Vanguard Professor of Management
Jesse H. Jones Graduate School of Business
Rice University

Granted patents do not necessarily warrant that the property rights granted are correct, and some patents did get invalidated later. However, the impact of such rare yet negative events is overlooked in the existing innovation literature. We propose that patent invalidation may serve as a negative signal of the quality of the patent owner’s other still-valid patents and reduce the patent owner’s opportunities to monetize these patents. In support to this argument, we find that patent invalidation reduces the likelihood of selling valid patents in the patent owner’s portfolio. Moreover, we find that the harm caused by patent invalidation is stronger if the patent is in the same tech class as the invalid patent and the negative impact of patent invalidation on patent sales will be weaker if the firm has more experience in patent sales and the firm is a foreign firm as opposed to a domestic one.