Patents are key to investor confidence

In the current market, patents play a pivotal role in R&D as a measurable indicator. Therefore, most studies have discussed the relationship between resource investment and patent output (Lanjouw, Schankerman 2004; Agliardi, E., Agliardi, R. 2011). Megna and Klock (1993), Ernst et al. (2010), and Suzuki (2011) measured patent indicators and business performance. Other studies have discussed various R&D input indicators, including R&D expenditure (R&D intensity or technological overflow), R&D technology sources (self-innovation, introduction for modification, partial introduction, total introduction and returns of royalty) and R&D output (number of patents and the number of new products to the market) (Thomas 2001; Watanabe et al. 2001; Hall, Bagchi-Sen 2002; Schoenecker, Swanson 2002; Reitzig 2003; Tseng, Wu 2007).

Patents are effective tools for increasing profits and maintaining market competitiveness. With the continuous accumulation of R&D strength, enterprises can use patents to generate substantial profits (Bukh 2003; Bebchuk, Cohen 2005). Lee et al. (2013) studied industrial competitiveness in relation to patents, and found that commercializing patents are an important topic of research. Patent rights, such as trademark rights, copyrights, or other intellectual property rights, are intellectual capitals, and have a significant impact on business. These findings agree with those of Johanson et al. (2001) and Arcelus et al. (2005).

Most relevant studies have focused on R&D indicators and R&D expenditures, while the impact of long and tedious patent litigation on the market has seldom been discussed. In recent years, Raghu et al. (2008) and Lee et al. (2013) found that patent infringement cases have grown in number. Lacking effective review of patent layout effectiveness, some enterprises are rather disadvantaged in patent defense and attacks regarding patent layout. As a result, intellectual properties cannot be fully used. Moreover, some enterprises use litigation in business competition, leading to a long patent infringement litigation process. If an enterprise is defeated in litigation, it has to pay a large amount in royalties, franchise fees, or damages, but may also be forced out of the market. The resources allocation of enterprises is closely related to market information efficiency. It not only affects the company value in the market economy, but also reflects the confidence of market investors and investment trends. Therefore, understanding the dynamic risk structure of patent infringement litigation is an important issue for the government, academia and industry (Bhagat et al. 1994; Lerner 1994; Fisher, Statman 2000).