Using Aggregate Market Data to Estimate Patent Value

40 Pages Posted: 2 Mar 2017 Last revised: 25 Oct 2018

See all articles by R. Scott Hiller

R. Scott Hiller

Fairfield University - Department of Economics

Scott Savage

University of Colorado at Boulder - Department of Economics

Donald Waldman

University of Colorado at Boulder - Department of Economics

Date Written: January 18, 2018

Abstract

Intellectual property and its protection is one of the most valuable assets for entrepreneurs and firms in the information economy. This article describes a relatively straightforward method for measuring patent value with aggregate market data and the BLP model. We apply the method to United States smartphones. The demand estimates and recovered marginal costs produce sensible simulations of equilibria prices and shares from several hypothetical patent infringements. In one simulation, the presence of near field communication on the dominant firm’s flagship smartphone results in a 26 percent increase in profits per phone. This estimate provides a starting point for establishing a reasonable royalty between the patent holder and the dominant firm in a hypothetical negotiation.

Keywords: intellectual property, random-coefficient logit demand, patent, smartphones

JEL Classification: D43, L96, O31

Suggested Citation

Hiller, R. Scott and Savage, Scott and Waldman, Donald, Using Aggregate Market Data to Estimate Patent Value (January 18, 2018). Available at SSRN: https://ssrn.com/abstract=2925934 or http://dx.doi.org/10.2139/ssrn.2925934

R. Scott Hiller (Contact Author)

Fairfield University - Department of Economics ( email )

Fairfield, CT 06824
United States

Scott Savage

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-735-1165 (Phone)
303-492-1112 (Fax)

HOME PAGE: http://holiday.colorado.edu/savages/

Donald Waldman

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States

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