Valuing Patents and Trademarks in Complex Production Chains

38 Pages Posted: 12 Dec 2015 Last revised: 10 Jan 2019

See all articles by Ben Klemens

Ben Klemens

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Date Written: December 13, 2018

Abstract

This article presents a new theoretical framework for evaluating the proportion of a product's surplus attributable to intellectual property (IP, such as patents or trademarks). It is used to explain the empirically observed differences between the use patterns of IP in industries based on discrete products, where patents are typically used to maintain monopolies; versus industries based on complex products, where patents are primarily licensing tools. In a complex production process, learning by doing allows a leading firm to gain some surplus without IP. As the number of steps approaches infinity, the surplus attributable to IP approaches zero. The value of the same patent held by a lagging producer for licensing to the leader does not approach zero, so the ratio of value for licensing to value for maintaining a leading monopoly diverges to infinity. Conversely, for a discrete product, these results do not hold and the traditional use to maintain a monopoly may remain the highest-value use.

Keywords: intellectual property, patent valuation, trademark valuation, production chains, learning by doing

JEL Classification: C65, D450, K110, O340

Suggested Citation

Klemens, Ben, Valuing Patents and Trademarks in Complex Production Chains (December 13, 2018). Available at SSRN: https://ssrn.com/abstract=2702102 or http://dx.doi.org/10.2139/ssrn.2702102

Ben Klemens (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 22203
United States

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