Do Trademark Infringement Lawsuits Affect Brand Value: A Stock Market Perspective

Many firms find that they can benefit from copying orotherwise misusing the trademarks of their competitors. Firmsthat have maintained a positive brand image are likely to fightany dilution or eventual loss of their trademark by using lawsuitsagainst offending firms. These lawsuits help to staunch any lossesto the brand and leave the potential for the benefits from thetrademark to flow back to the firm. These benefits will be temperedby legal costs, potential infringement by other firms in futureand the need to file lawsuits in response. In contrast, firmsthat have infringed on a trademark are likely to lose if theowner of the trademark challenges them in court. This study relatesthe stock returns of firms to the filing of lawsuits to defendtrademarks. We study the impact of both the filing of the lawsuitand the eventual verdict of the court on the stock market valueof defendant and plaintiff firms. The protection of a trademarkby a plaintiff using a lawsuit resulted in a negative returnto the shareholders of the defendant firm that infringed on thetrademark. The returns to the plaintiff firms were mixed andof marginal magnitude due to offsetting factors although largefirms experienced positive returns.