Which patents go open? External value, internal value, and the open licensing decision

Patent renewal-fee reductions are used to encourage non-exclusive licensing, but a long-standing concern is that such incentives attract low-value patents. This paper studies China's Open Patent Licensing (OPL) system, which ties the fee reduction to a concluded licensing contract, asking whether this design leads patent owners to declare high-value patents. We distinguish between external value, a technology's commercial relevance to outside parties, and internal value, its role in the owner's follow-on R&D, arguing that the two pull licensing decisions in opposite directions. Using OPL declarations from 2021 to 2024 matched to comparable non-declared patents, we show that higher external value increases the likelihood of declaration, more strongly for corporate patentees than for universities. We then separate two directions of deviation from this benchmark: over-declaration, the declaration of low-external-value patents, and under-declaration, the non-declaration of high-external-value patents. Among corporate patentees, under-declaration rates exceed over-declaration rates, and small and medium enterprises (SMEs) exhibit higher under-declaration than large firms. Internal value reinforces under-declaration in both firm types, while experience lowers under-declaration for SMEs. These findings suggest that conditional fee reductions alone cannot unlock high-value patents, and that combining external and internal value signals can improve licensing outcomes.