Patent Thickets: An Empirical Study of Vicious Circles

Rasmus Haahr & Philip Lyng Madsen

Student thesis: Master thesis


In this thesis we measure the impact of patent thickets on US firm value in the period 1980-2004. We combine patent data from NBER with firm-level financial data from Compustat, and conduct econometric fixed effects analysis on the consolidated panel dataset. We find evidence that patenting is individually rational for firms, and that rival patenting and fragmentation of patent rights are detrimental to firm value. Subsequently, we analyze two distinct datasets: one covering discrete industries such as consumer discretionary & staples, and one covering complex industries such as IT. We find that firms in discrete industries are unaffected by competitor patenting, while firms in complex industries are impeded by patenting even from firms that are not direct competitors. Our results suggest that firms in complex industries are trapped in a prisoner’s dilemma, that is, a common reduction in patenting would make everyone better off.

EducationsMSc in Business Administration and Management Science, (Graduate Programme) Final Thesis
Publication date2014
Number of pages190