Japan's Shift From Process to Product Patents in the Pharmaceutical Industry: An Event Study of the Impact on Japanese Firms

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Abstract
In 1976 Japan expanded the scope of its patent law by extending coverage to newly-developed chemical and pharmaceutical products. Previously the patent law had only provided protection to new production processes for manufacturing chemicals and pharmaceuticals. We use rate of return data from the Tokyo Stock Exchange for Japanese pharmaceutical companies to determine whether these firms gained from the introduction of pharmaceutical product patents. Using two different methodologies we find that the stock price for a portfolio of pharmaceutical firms and for individual firms significantly increased in response to the passage of the 1975 patent law.

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