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Valuation of Patented Product Features

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Listed:
  • Greg M. Allenby
  • Jeff Brazell
  • John R. Howell
  • Peter E. Rossi

Abstract

Ultimately, patents have value to the extent to which the product features enabled by the patents have economic value in the marketplace. Products that are enhanced by inclusion of patented features should generate incremental profits. Incremental profits can be assessed by considering demand for products with patented features and contrasting that demand with demand for the same product without the patented features. Profit calculations must be based on valid estimates of demand as well as assumptions about how competitive forces affect demand via computation of market equilibria. A conjoint survey can be used to estimate demand. Recently, conjoint methods have been applied in the patent setting, but the measures of value used are purely demand based and do not involve equilibrium profit calculations. We illustrate our method using the market for digital cameras and show that current methods can overstate the value of a patent.

Suggested Citation

  • Greg M. Allenby & Jeff Brazell & John R. Howell & Peter E. Rossi, 2014. "Valuation of Patented Product Features," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 629-663.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/677071
    DOI: 10.1086/677071
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    References listed on IDEAS

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    Cited by:

    1. Chryssoula Pentheroudakis & Justus A. Baron, 2016. "Licensing Terms of Standard Essential Patents: A Comprehensive Analysis of Cases," JRC Research Reports JRC104068, Joint Research Centre (Seville site).
    2. YiChun Miriam Liu & Jeff D. Brazell & Greg M. Allenby, 2022. "Non-linear pricing effects in conjoint analysis," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 397-430, December.
    3. Sofia B. Villas‐Boas & Céline Bonnet & James Hilger, 2021. "Random Utility Models, Wine and Experts," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 663-681, March.
    4. Carsten Herbes & Johannes Dahlin & Peter Kurz, 2020. "Consumer Willingness To Pay for Proenvironmental Attributes of Biogas Digestate-Based Potting Soil," Sustainability, MDPI, vol. 12(16), pages 1-19, August.
    5. Kim, Jin-Hyuk & Leung, Tin Cheuk, 2021. "Eliminating digital rights management from the E-book market," Information Economics and Policy, Elsevier, vol. 57(C).
    6. Baron, Justus, 2020. "Counting standard contributions to measure the value of patent portfolios - A tale of apples and oranges," Telecommunications Policy, Elsevier, vol. 44(3).
    7. Greg Allenby & Jeff Brazell & John Howell & Peter Rossi, 2014. "Economic valuation of product features," Quantitative Marketing and Economics (QME), Springer, vol. 12(4), pages 421-456, December.
    8. Hiller, R. Scott & Savage, Scott J. & Waldman, Donald M., 2018. "Using aggregate market data to estimate patent value: An application to United States smartphones 2010 to 2015," International Journal of Industrial Organization, Elsevier, vol. 60(C), pages 1-31.

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