Valuing Patents and Trademarks in Complex Production Chains
36 Pages Posted: 12 Dec 2015 Last revised: 22 Jun 2018
Date Written: June 15, 2018
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). In a multi-step production process, learning by doing allows a leading firm to gain some surplus without IP, and as the number of steps approaches infinity, that surplus approaches the full value of the product. As a product increases in complexity, the ratio of the value of IP for rent extraction by a lagging firm to value for maintaining a monopoly by a leading firm diverges to infinity. The model may offer a better guide for policy because it closely reflects the empirically observed differences between the use patterns of IP in industries based on discrete versus complex products.
Keywords: intellectual property, patent valuation, trademark valuation, production chains, learning by doing
JEL Classification: C65, D450, K110, O340
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