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Patent Renewals as Options: Improving the Mechanism for Weeding Out Lousy Patents

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  • Marc Baudry

    ()

  • Béatrice Dumont

Abstract

This paper examines how patent renewal fees may be restructured to discourage low-value patents with the goal of reducing the burden on patent offices without unduly impairing innovation incentives. We depart from Pakes’ (1986, Econometrica, 54, 755–784) real-option model by moving to an approach involving binomial trees, widely used in valuing financial options. The new approach has the advantage of allowing the dynamics of the patent rent to follow a wide range of stochastic processes. The model is estimated using French data from 1970 to 2002. Policy simulations cast some doubt on the relevance of the current schedule of renewal fees. An alternative fee schedule is suggested. Copyright Springer 2006

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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 28 (2006)
Issue (Month): 1 (02)
Pages: 41-62

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Handle: RePEc:kap:revind:v:28:y:2006:i:1:p:41-62

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Web page: http://www.springerlink.com/link.asp?id=100336

Related research

Keywords: patent renewal; real-option model; C51; O31;

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References

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  1. Gans Joshua S & King Stephen P & Lampe Ryan, 2004. "Patent Renewal Fees and Self-Funding Patent Offices," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-15, July.
  2. Jean Olson Lanjouw, 1993. "Patent Protection: Of What Value and for How Long?," NBER Working Papers 4475, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Marc Baudry & Béatrice Dumont, 2012. "Valuing patents using renewal data : an inquiry into the feasability of an automated patent scoring method," EconomiX Working Papers 2012-31, University of Paris West - Nanterre la Défense, EconomiX.
  2. Christopher Snyder, 2006. "Introduction to the 2005 International Industrial Organization Conference Special Issue," Review of Industrial Organization, Springer, vol. 28(1), pages 1-2, 02.
  3. Zhang, Gupeng & Lv, Xiaofeng & Zhou, Jianghua, 2014. "Private value of patent right and patent infringement: An empirical study based on patent renewal data of China," China Economic Review, Elsevier, vol. 28(C), pages 37-54.
  4. Bessen, James, 2008. "The value of U.S. patents by owner and patent characteristics," Research Policy, Elsevier, vol. 37(5), pages 932-945, June.
  5. Huang, Can, 2012. "Estimates of the value of patent rights in China," MERIT Working Papers 004, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  6. Chi Leung & Yue Kwok, 2011. "Real options game analysis of sleeping patents," Decisions in Economics and Finance, Springer, vol. 34(1), pages 41-65, May.
  7. Liu, Kun & Arthurs, Jonathan & Cullen, John & Alexander, Roger, 2008. "Internal sequential innovations: How does interrelatedness affect patent renewal?," Research Policy, Elsevier, vol. 37(5), pages 946-953, June.
  8. Giummo, Jesse, 2010. "German employee inventors' compensation records: A window into the returns to patented inventions," Research Policy, Elsevier, vol. 39(7), pages 969-984, September.
  9. Danguy, Jérôme & van Pottelsberghe de la Potterie, Bruno, 2010. "Cost-Benefit Analysis of the Community Patent," CEPR Discussion Papers 7631, C.E.P.R. Discussion Papers.
  10. Roy Cerqueti & Marco Ventura, 2009. "A Discrete Model for Patent Valuation," ISAE Working Papers 120, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  11. Bessen, James, 2009. "Estimates of patent rents from firm market value," Research Policy, Elsevier, vol. 38(10), pages 1604-1616, December.
  12. Gupeng, Zhang & Xiangdong, Chen, 2012. "The value of invention patents in China: Country origin and technology field differences," China Economic Review, Elsevier, vol. 23(2), pages 357-370.
  13. Lubica Hikkerova & Niaz Kammoun & Jean-Sébastien Lantz, 2014. "Patent Life Cycle: New Evidence," Working Papers 2014-367, Department of Research, Ipag Business School.
  14. Marc Baudry & Béatrice Dumont, 2009. "A Bayesian Real Option Approach to Patents and Optimal Renewal Fees," Working Papers hal-00419330, HAL.

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