Estimates of the Value of Patent Rights in European Countries During the Post-1950 Period

The principal objectives of this paper are to estimate and analyse the private value of patent rights in the United Kingdom, France and Germany during the post-1950 period, and to provide and consider some implications of an index of the `quality' (or average private value) of patents. Since patent rights are seldom marketed, their private value is in general unobserved. This paper makes inferences on the value of patent rights from the economic responses of patentees. in most countries patentees must pay an annual renewal fee in order to keep their patents in force. If it is assumed that agents make renewal decisions based on the value of the patent right obtained by renewal, then data on patent renewals and renewal fee schedules contain information on the distribution of the value of patent rights. In Section I we outline a simple economic model of patent renewal decisions which, when combined with the renewal data, allows us to estimate the distribution of the private value of patent protection. Section II describes the data set and provides some simple nonparametric evidence on shifts in the patent value distribution over time. In Section III we parameterise the model, and then present and discuss the estimates. This includes some discussion of the empirical correlates of intertemporal changes in the value distribution. Section IV derives estimates of the quantiles of the distribution of the value of patent rights, and compares our results to information on both the distribution of the value of patented ideas and on the resource cost of producing them. Section V considers some implications of our results for the distinction between measures of the quantity and the value of patents. The results indicate that the average value of patents varies across countries. We also use the estimates to examine the relationship between the decline in patenting activity since the late 1960s, the simultaneous fall in patents per unit of inventive output.