Estimates of Patent Rents from Firm Market Value

41 Pages Posted: 28 Jun 2006 Last revised: 29 Nov 2014

James E. Bessen

Technology & Policy Research Initiative, BU School of Law

Date Written: November 1, 2007

Abstract

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.

Keywords: technology, patents, innovation, patent value, firm value

JEL Classification: O34, O38, K1

Suggested Citation

Bessen, James E., Estimates of Patent Rents from Firm Market Value (November 1, 2007). Boston Univ. School of Law Working Paper No. 06-14. Available at SSRN: https://ssrn.com/abstract=912661 or http://dx.doi.org/10.2139/ssrn.912661

James E. Bessen (Contact Author)

Technology & Policy Research Initiative, BU School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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