We explore the relationship between the stock market value of firms and patent quality using a recently developed composite index measure. The study is conducted on 137 firms during 1991-2015, which provides 914 unique firm year observations. By defining patent quality through patent value indicators, we analyze each indicator’s relationship to the market value of firms. We find that an extra citation per patent increases a firm’s market value by 5 %, and an extra patent family member per patent increases a firm’s market value by 4 %. Patent counts and patent grants show slight negative effects on the market value of firms. Using the composite index measure, we divide our sample into quartiles containing the most important and least important patents. With the use of this methodological framework, we show that the market can identify and separate the more important patents from the less important patents.