Abstract

This paper investigates the economic impact of intellectual property infringement lawsuits on the values of both the plaintiff and the defendant firms in the information technology industry. Event study methodology is used to investigate the effect of the litigation on the stock market returns around the date of commencement as well as the date of termination. Our results suggest that the news of intellectual property infringement lawsuits was unfavorably accepted in the stock market for the defendants. On the other hand, abnormal returns for plaintiff firms around lawsuit commencement date were significantly positive, while those at termination date were not positive at a statistically significant level. We also found that firms in other technology sectors have been influenced more by the intellectual property infringement lawsuits than those in computer hardware & peripheral sectors.