How does patent litigation help disclose patent value? Evidence in PC chipset firms

Although a number of studies view the patent regime as an isolating mechanism for imitation, some are skeptical of its effectiveness because patent value is mostly nontransparent to outsiders. Patent litigation may therefore provide an arena in which patent value is somehow disclosed to the parties concerned. In response to the recent calls for more inquiries into the transparency of patent value and the performance consequence, we not only identify the situations that patent litigation is more likely to happen but also examine the performance implication of the owner of a patent involving in a litigation. In a sample of 607 patents granted in the PC chipset industry, the study shows that patent quality and scope significantly enhance the likelihood of patent litigation. In addition, the cognitive constraints (or the limitation of information processing capability) of the patentee weaken the relationship between patent scope and the odds of litigation. Furthermore, this evidence supports that patents involving in litigation contribute to the performance of their owners.