Patents as Options: Some Estimates of the Value of Holding European Patent Stocks

69 Pages Posted: 26 Dec 2001 Last revised: 3 Feb 2015

See all articles by Ariel Pakes

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Date Written: April 1984

Abstract

In many countries holders of patents must pay an annual renewal fee in order to keep their patents in force. This paper uses data on the proportion of patents renewed, and the renewal fees faced by, post World War II cohorts of patents in France, the United Kingdom, and Germany, in conjunction with a model of patent holders' renewal decisions, to estimate the returns earned from holding patents in these countries. Since patents are often applied for at a nearly stage in the innovation process, the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce. Formally, then, the paper presents and solves a discrete choice optimal stochastic control model, derives the implications of the model on aggregate behaviour, and then estimates the parameters of the model from aggregate data. The estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans,and calculations of both; the annual returns earned from holding the patents still in force (or the patent stocks) in the alternative countries, and the distribution of the discounted value of returns earned from holding the patents in a cohort.

Suggested Citation

Pakes, Ariel, Patents as Options: Some Estimates of the Value of Holding European Patent Stocks (April 1984). NBER Working Paper No. w1340. Available at SSRN: https://ssrn.com/abstract=278751

Ariel Pakes (Contact Author)

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Harvard University - Department of Economics ( email )

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