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A Bayesian Real Option Approach to Patents and Optimal Renewal Fees

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  • Marc Baudry

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes)

  • Béatrice Dumont

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article aims at estimating the optimal profile of renewal fees patent offices should implement. It is at the crossroad of two strands of literature. The first strand is the theoretical literature analysing renewal fees as an optimal revelation mechanism. The second strand is the econometric literature developing real option models of patent renewal decisions to assess the value of patents. Using data from the French patent office, we find that there is little room to lower the social cost of patents without affecting the monetary incentives to apply for a patent and innovate. We show that a menu of optimally defined profiles helps to further discriminate among patents.

Suggested Citation

  • Marc Baudry & Béatrice Dumont, 2009. "A Bayesian Real Option Approach to Patents and Optimal Renewal Fees," Working Papers hal-00419330, HAL.
  • Handle: RePEc:hal:wpaper:hal-00419330
    Note: View the original document on HAL open archive server: https://hal.science/hal-00419330
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    References listed on IDEAS

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    1. Marc Baudry & Béatrice Dumont, 2006. "Patent Renewals as Options: Improving the Mechanism for Weeding Out Lousy Patents," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(1), pages 41-62, February.
    2. Claude Crampes & Corinne Langinier, 1998. "Information Disclosure in the REnewal of Patent," Annals of Economics and Statistics, GENES, issue 49-50, pages 265-288.
    3. Giuseppe Moscarini & Lones Smith, 2001. "The Optimal Level of Experimentation," Econometrica, Econometric Society, vol. 69(6), pages 1629-1644, November.
    4. 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.
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    6. Gaetan de Rassenfosse & Bruno van Pottelsberghe de la Potterie, 2012. "On the Price Elasticity of Demand for Patents," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(1), pages 58-77, February.
    7. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
    8. Francesca Cornelli & Mark Schankerman, 1999. "Patent Renewals and R&D Incentives," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 197-213, Summer.
    9. Kelly, David L. & Kolstad, Charles D., 1999. "Bayesian learning, growth, and pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 491-518, February.
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    Cited by:

    1. Danguy Jérôme & van Pottelsberghe de la Potterie Bruno, 2011. "Cost-Benefit Analysis of the Community Patent," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(2), pages 1-43, April.
    2. Malte Mosel, 2011. "Big patents, small secrets: how firms protect inventions when R&D outcome is heterogeneous," Working Papers 105, Bavarian Graduate Program in Economics (BGPE).
    3. Malte Mosel, 2012. "The role of patents and secrecy for intellectual property protection: theory and evidence," Working Papers 117, Bavarian Graduate Program in Economics (BGPE).
    4. Gaetan de Rassenfosse & Bruno van Pottelsberghe de la Potterie, 2013. "The Role Of Fees In Patent Systems: Theory And Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 696-716, September.
    5. Rudyk, Ilja, 2013. "Deferred Patent Examination," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 416, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Rudyk, Ilja, 2012. "The License of Right, Compulsory Licensing and the Value of Exclusivity," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 415, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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