Article | Advances in Strategic Management | 2007

Business Methods Patents as Real Options: Value and Disclosure as Drivers of Litigation

by Atul Nerkar, Srikanth Paruchuri and Mukti Khaire

Abstract

This paper proposes that patents are real options that allow holders of patents the right but not the obligation to sue others. We suggest that the likelihood of a patent's being litigated is positively associated with the value of the patent and the extent of disclosure (prior art cited) in the patent. However, under the conditions of greater value, increases in disclosure reduce the likelihood of litigation of the focal patent. Similarly, under conditions of greater disclosure, increases in value reduce the likelihood of litigation of the focal patent. Rare events logit analyses of business method patents that were litigated compared to patents that were not litigated offer empirical evidence supporting the hypotheses.

Keywords: Value; Corporate Disclosure; Lawsuits and Litigation; Patents; Rights; Business Processes;

Citation:

Nerkar, Atul, Srikanth Paruchuri, and Mukti Khaire. "Business Methods Patents as Real Options: Value and Disclosure as Drivers of Litigation." Advances in Strategic Management 24 (2007): 247–274.