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Patent Protection: Of What Value and for How Long?

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  • Jean Olson Lanjouw
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    Abstract

    Empirical estimates of the private value of patent protection are found for four technology area - computers, textiles, combustion engines, and pharmaceuticals - using new patent data for West Germany, 1953-1988. Patentees must pay to keep their patents in force. A dynamic stochastic discrete choice model of optimal renewal decisions is developed incorporating both learning about an innovation and the market as well as the possibility of infringements. The evolution of the distribution of returns over the life of a group of patents is calculated for each technology using a minimum distance simulation estimator. Results indicate that learning is completed within 6 years, that obsolescence is rapid, and that the distributions of patent value are very skewed. Research and development (R&D) expenditures are calculated and patent protection as an implicit subsidy to investment in R&D discussed.

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    File URL: http://www.nber.org/papers/w4475.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4475.

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    Date of creation: Sep 1993
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    Publication status: published as The Review of Economic Studies, Vol 65 (1998): 671-710.
    Handle: RePEc:nbr:nberwo:4475

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    1. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
    2. Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
    3. Jean Olson Lanjouw, 1992. "Under Threat: Potential Competition, Litigation and the Private Value of Patent Protection," STICERD - Economics of Industry Papers 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    4. Iain Cockburn & Zvi Griliches, 1987. "Industry Effects and Appropriability Measures in the Stock Markets Valuation of R&D and Patents," NBER Working Papers 2465, National Bureau of Economic Research, Inc.
    5. Orley Ashenfelter & David Bloom, 1993. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game," NBER Working Papers 4447, National Bureau of Economic Research, Inc.
    6. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
    7. repec:fth:prinin:270 is not listed on IDEAS
    8. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. repec:fth:harver:1473 is not listed on IDEAS
    10. Bronwyn H. Hall & Zvi Griliches & Jerry A. Hausman, 1984. "Patents and R&D: Is There A Lag?," NBER Working Papers 1454, National Bureau of Economic Research, Inc.
    11. Pakes, Ariel, 1985. "On Patents, R&D, and the Stock Market Rate of Return," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 390-409, April.
    12. Ariel Pakes & Mark Schankerman, 1979. "The Rate of Obsolescence Of Knowledge, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Working Papers 0346, National Bureau of Economic Research, Inc.
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