Court Decisions and Equity Markets: Estimating the Value of Copyright Protection

Abstract

We use a novel database on U. S. federal court decisions to measure the changes in the state of copyright protection in both statute and case law. We combine an index of copyright breadth derived from this database with a quarterly panel of firms in creative industries over the years 1986-1998. Using this data, we measure the impact of changes in the breadth of copyright on the market valuation of firm equity. We maintain the assumption that equity markets will incorporate the value of copyright innovations into the price of equity. After controlling for a variety of fundamental determinants of ¯rm-level excess returns to equity, we find that a court case broadening copyright is associated with a statistically significant 23-45 basis points increase in a firm's excess return. Our results obtain across both 4-5 year sub-samples and the size distribution of firms.