Estimates of Patent Rents from Firm Market Value
James E. Bessen
Boston University - School of Law; Research on Innovation
November 1, 2007
Boston Univ. School of Law Working Paper No. 06-14
The value of patent rents is an important quantity for policy analysis. However, estimates in the literature based on patent renewals might be understated. Market value regressions could provide validation, but they have not had clear theoretical foundations for estimating patent rents. I develop a simple model to make upper bound estimates of patent rents using regressions on Tobin's Q. I test this on a sample of US firms and find it robust to a variety of considerations. My estimates correspond well with estimates based on patentee behavior outside the pharmaceutical industry, but renewal estimates might be understated for pharmaceuticals.
Number of Pages in PDF File: 41
Keywords: technology, patents, innovation, patent value, firm value
JEL Classification: O34, O38, K1
Date posted: June 28, 2006 ; Last revised: November 29, 2014
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