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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

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Working Paper

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We use detailed data to estimate the private costs and private rents of United States patents for publicly-traded firms. In analyzing costs, we first introduce a novel theoretical model to interpret our estimates. We then combine lawsuit data from Derwent Litalert with non-practicing entity (NPE) lawsuits collected by Patent Freedom, and use an event-study approach to estimate losses suffered by alleged infringers during 1984-2009. To estimate rents, we combine patent data from the USPTO and EPO with financial data from COMPUSTAT, and use market-value regressions to estimate the value of patent rents for publicly-traded US firms during 1979-2002. We find that private costs exceed private rents during 1999-2000 and the trend in costs is sharply higher. Costs also exceed forecasts of rents for 2005-09. A surge in the number of NPE lawsuits contributes to the increase in the gap.

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