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

  • Marc Baudry

    ()

  • Béatrice Dumont

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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File URL: http://hdl.handle.net/10.1007/s11151-006-0001-0
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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Jean Olson Lanjouw, 1993. "Patent Protection: Of What Value and for How Long?," NBER Working Papers 4475, National Bureau of Economic Research, Inc.
  2. 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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