The Theory of Innovation & Entrepreneurship: Today's Menu

The Theory of Innovation & Entrepreneurship
Prof. Bruno van Pottelsberghe Ass. Nicolas van Zeebroeck

GEST 112 (Technological Innovation) S6: The Value of Patents
Todays Menu .
S6.1. The Cost of patenting
Van Pottelsberghe B. and D. Franois, 2006, The cost factor in patent systems, working paper.
S6.2. The Value of Patents

Harhoff D., Scherer F. M. and Vopel K. (1999),"Citations, Family Size, Opposition and the Value of Patent Rights", 31p. Reitzig M. (2004), Improving patent valuations for management purposes - validating new indicators by analyzing application rationales, Research Policy, n 33 (2004), pp. 939957.
S6.3. The Determinants of Patent Value

Guellec D. and Van Pottelsberghe B. (2000), Applications, Grants and the value of patents, Economic Letters, 69(1).
S6.4. Financial Valorization and Securitization

Van Pottelsberghe SBS S6
Edwards D. (2002), Patent Backed Securitization: Blueprint for a new asset class, Gerling NCM, 2001. Washington|CORE.
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6.1. The cost of patenting
Objectives :
Whether and to what extent the cost of patenting affect the demand for patent?
Put forward a methodology for comparative analysis of patent systems : the 3-C index The role of cost Non-cost factors
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Table 1. EPO, USPTO and JPO: Basic figures, 2003

EPO Total staff Patent examiners Annual revenue, M Total Patent Filings Total Patent Granted 5,821 3.400 1,022 116,613 59,992 USPTO 6,723 3,637 950 JPO 2,479 1,1262 839 413,092 122,511
x3
342,441 169,028
Geographical origins of patent filings (%) USA Japan EPC States Others 27 16 50 7 55 18 15 13 5 88 3 4
Why? to expensive? Not all domestic patents? different patents?

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Caveats: EU does not include the domestic priority filings... but Similar percentage of filings from abroad at the USPTO and at the EPO, about 50% (2nd filings) Similar percentage of filings from Japan at the USPTO and at the EPO, about 18% : (2nd filings) They confirm that the US market is three times more attractive that the European market.
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Table 1. EPO, USPTO and JPO: Basic figures, 2003

EPO Total staff Patent examiners Annual revenue, M Total Patent Filings Total Patent Granted 5,821 3.400 1,022 116,613 59,992 USPTO 6,723 3,637 950 342,441 169,028 JPO 2,479 1,1262 839 413,092 122,511
Geographical origins of patent filings (%) USA Japan EPC States Others
27 16 50 7
55 18 15 13
5 88 3 4
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Market size and patent filings, 2003
450000 Japan 400000 350000 U SA 300000 Patent filed 250000 200000 150000 100000 50000 0 0 50 100 150 200 250 300 350 400
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E U3
E U13
E U25
450
500
Population (M)
Market size and geographically designated patent filings, 2003

450000 Japan 400000 350000 300000 N of filing 250000 200000 150000 E PO3 100000 E PO13 50000 0 0 50 100 150 200 Pop ulation (M ) 250 300 350
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U SA
400
Not all patents are the same
Number of claims of applications at the USPTO: 23-24 At the JPO: 7 At the EPO: 18. Many other differences
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Market size and geographically designated filings of claims, 2003

9,0 8,0
U SA
7,0 6,0 M of claims fi 5,0 4,0
Japan
3,0
E PO3
2,0
E PO13
1,0 0,0 0 50 100 150 200 Population (M ) 250 300 350
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400
Why no size effect? Why _ so few patents at EPO? EPO = second filings (however Japan) Not a European market for technology: once granted the patent must be validated, translated. In each individual member country A matter of cost?
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Cost effect in the literature?
Surveys always underline the high cost of patenting perceived by firms Surveys always underline a lack of confidence in the IP system BUT:
No correlation with patenting behavior
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The cost of patenting

Official fees Patent attorney for document Patent attorney for interaction Patent attorney for translations Validation fees Renewal fees
In house or outsourced + transaction cost

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Cost is unique for each patent: Quality of services Number of claims/page Desired geographical scope Desired speed of services Desired route (PCT, Direct)
Hypotheses:
3 or 13 EU member countries Average number of claims To grant, to 10 years, to 20 years
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Roland Berger, 2005 Survey

This paper, Table 3
All
Designated states Number of claims EPO fees
RB (2005)1
Euro-PCT
8 15
6,300
All
13 18
6,575
Euro-Direct
6 6
4,400
3 18
4,670
Translation costs
Renewal fees, including:
Fees Attorneys
3,400*
13,600*
7,400
16,000
3,400
10,900
5,600 5,300
2,975
16,597
9,200 6,800
TOTAL, including:
Attorneys and prof. rep.
23,545
12,500**
56,272
19,500**
46,550
22,100
31,580
17,780
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Comparative cost structure of patent applications and maintenance

130.000 120.000 110.000 100.000 90.000 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0
Process costs Process and translation Process and external serv. TOTAL 10 years TOTAL 20 years
8,070 4,670
20,175 6,575 3,065 1,541
EPO3
EPO13
USPTO
|JPO 17
Proposals for comparative cost analysis: Process and translation costs more reliable (but no professional representation costs) Analyse the cost per claim Analyse the cost per claim per market unit (capita) : 3C-index
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Patent costs per claim in the three offices

7000 6000 5000
EPO13
EUR
4000 3000 2000

EPO3
1000 0 Process costs

JPO USPTO
Process and translation
Process and external serv. Cumulative costs
TOTAL 10 years TOTAL 20 years

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European and Japanese costs relative to the US

Process and translation 2.6 6.6 0.5 TOTAL 10 years 1.7 4.2 0.6 TOTAL 20 years 2.6 7.8 1.1
PATENTS
EPO3 EPO13 JPO
CLAIMS
EPO3 EPO13 JPO
3.4 8.4 1.7
2.2 5.3 1.9
3.4 10.0 3.5
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10
Millions of claims filed vs. process cost per claim

9,0 8,0 7,0 6,0
USA
M of Claim
5,0 4,0
Japan
3,0
E U3
2,0 1,0 0,0 0 200 400 600 R E U 800 1000
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E U13
1200
Millions of claims filed vs. process cost per claim per capita : 3C-index
9,0 8,0 7,0 6,0
U SA
Mof claim
5,0 4,0 3,0 2,0 1,0 0,0

0,0 0,5 1,0 1,5 2,0 2,5 3,0
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Japan E U3 E U13
3,
E U R
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Qualitative indicators in the three regional offices

EPO
Examination rate Procedure pendency (in months)
USPTO
100% 27
JPO
53.8% 31 exam 2.9 Million 170.3* 50.5* 1,195 371* 50% (QW: 64%)
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87% Search: 12 Exam : 38 2.1 Million 34.6 17.8 624.1 326.9 59% (QW: 67%)
Total number of claims filed Filings per examiner
7.9 Million 96.9 47.8 2,235
Grants per examiner
Claims filed per examiner Claims granted per examiner Grant rate2 Van Pottelsberghe SBS S6
3 to 4
1,103
64% (QW: 87 to 97%)
Other factors than costs... No perceived Europen market : complexity Longer process, more time per patent More rigor, and hence quality Less domains of patentability
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Concluding Remarks on costs

Methodological implications: 3C-index Europe attracts much less patents than the USA, there is no Europe-wide market for technology The higher cost of patents induce a smaller demand The higher rigor of the EPO process would justify higher examination fees and explain a smaller demand for patent... but not the 'virtually' higher costs related to validation, translation, transactions, renewals in each individual member state
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Concluding Remarks on costs

European Community patent a dream European Patent Litigation Agreement London Protocol (much lower translation costs)
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13
Patenting Processes
European Patent (Under current EPC)
Toward a European Community Patent?

Belgian Patent French Patent EPO Filing Application Procedure at EPO (Munich) German Patent UK Patent Enforcement in National Courts Grant Death
Filing
European Community Patent (in the future?)

EPO Filing Application Procedure at EPO Filing Grant
European Patent Enforcement in Central European Patent Court Death

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6.2. The Value of Patents

1. The Value of Patents 2. A Skewed Value Distribution 3. Valorization Models
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1. The Value of Patents
Patent Value
For
corporation
involved
in
technological competition, the value of a patent is best defined as its asset value
(Harhoff et al., 2003)
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Patent Value
If the value of a patent is best defined as its asset value, then the value of the patent is actually the present value of its future cash flows 1- If the patent is exploited by its holder, then it is the value of the margins on the sold products issuing from the patent Share of revenues really due to patent??? 2- If the patent is licensed out by its holder to external companies, than it is the value of the royalty fees generated by the patent Very difficult to observe
Proxies or Indicators only

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Patent Value
Two different types of value proxies: 1- Indicators of patents value show a direct correlation with observable prices, costs, or sold quantities of the patent-protected product, 2- Indicators operationalize latent determinants of patent value such as novelty, inventive step, breadth, difficulty of inventing around, disclosure, and dependence on complementary assets.
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2. A Skewed Value Distribution
Patent Value
Guellec & van Pottelsberghe
Inventions 1
Applic. 2
Grants 3
High value 4
Increasing value
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3. Valorization Models
Patent Value
Little theoretical understanding and even less empirical evidence on the complex interaction between indicators, determinants and prices, costs, and quantities of protected products sold. Until today, a variety of variables have been tested as indicators of patent value. Amongst them, Reitzig (2002) analyzes the appropriateness of 13 indicators. The 3 evaluation criteria are: -The validity of the indicator variable -The point in time at which the information to compute the indicator becomes accessible -If the information is available electronically or has to be collected manually.
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18
Patent Value
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Patent Value
State of the Art
Three generations of indicators of patent value: 1. The authors of the 1st generation validate indicators which are linked to patent value by rationales that speak to rather general economic considerations (i.e., family size, market value, forward & backward citations) it does not involve in-depth knowledge of institutional details of the patent system. 2. The 2nd generation indicators use patent-specific procedural information and link it to patent value (i.e., referring to the filing strategy or the legal contents of backward citations). 3. The 3rd, new generation: using the patent-full text documents (i.e., correlation between nber of claims & macro indices of a nations technological performance)
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19
Patent Value
State of the Art Generation What the indicators Research of a generation have in common:
1st General economic considerations Pattern-specific economic considerations Patent full-text documents (vs making use only of 1st page info) Empirical evidence
2nd
Less empirical evidence New field of research
3rd
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6.3. Determinants of Patent Value
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Patent Value
Survey of Harhoff, Scherer & Vopel (1999)
Assessing the value of patent rights is difficult (distribution is skewed) Skewness property (Griliches) : These findings, especially
the large amount of skewness in this distribution, lead to rather pessimistic implications for the use of patent counts as indicators of short-run changes in the output of R&D.
Need additional information which is correlated with the true value of the patent right Allow much greater accuracy than unweighted count statistics Attempt to solve the problem : use of the information contained in renewal decisions of patent holders (Schankerman and Pakes)
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Patent Value
Survey of Harhoff, Scherer & Vopel (1999) Others correlates of patent value that have been studied are : Market value of biotechnology firms (Lerner 1994) Social returns to innovation in the computertomography scanner industry (Trajtenberg 1990) Number of juridictions in which patent protection is sought (Putnam 1996) The value of patent rights can be approximated by combining these indicators This survey uses a broad set of indicators which are :
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21
Patent Value
Survey of Harhoff, Scherer & Vopel (1999) Forward citations (citations received from subsequent patents) Backward citations (references to other patents) The number of references made to the non-patent literature, i.e. mostly to scientific journals. The outcome of opposition proceedings Patent "family size (the number of countries in which patents were granted for the same invention) The scope of the patent (that has as proxy the number of different four-digit IPC classifications)
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Patent Value
Theoretical Issues in Measuring the Value of Patent Rights They focus on the private value of patent rights and consider two concepts : the value of renewed patent protection the asset value of the patent right
Three scenarios:
I. In the first scenario, the patent protects a quality improvement of a product, but there is no interaction between this particular and other patent rights. II. They allow for such interactions as they occur in cumulative research processes. In such cases, control over one patent may affect the value of other patent rights as well if the owner of one patent can block the use of the other. III. They consider the case of multiple patents covering technologies that are perfect substitutes for each other.
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Patent Value
Estimates of patent value the left hand side, explained variable Purpose: In what extent patent value is explained by observables (citations, scope,)? First step: a survey to obtain value estimates that were meant to capture asset values of patent rights. The survey was directed at German patent-holders and conducted in 1996. It considered all patent grants with a 1977 German priority date which were renewed to full term, i.e., expired during 1995. Data on 4349 patents that were applied for in 1977 and renewed to full term.
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Patent Value
Estimates of patent value the left hand side, explained variable Sample was asked a single question : If in 1980 you had known how its contribution to the
future profitability of
your enterprise would unfold, would have
what is the minimum price for which you to purchase?
sold the patent, assuming that you had a good-faith offer
Respondents were asked to place their patent within one of 5 broad minimum selling price ranges: less than DM 100,000, DM 100-399,999, DM 400-999,999, DM 1-5 million, and more than DM 5 million.
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Patent Value
Results of the survey - The distribution of the value of patent rights
Positive responses were obtained on 772 patents (57.1% of the total on which contacts were made) held by 394 organizational entities and individual inventors (+ or 10).
The distribution of the value of patent rights is summarized in the following Table.
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Patent Value
Results of the survey - The distribution of the value of patent rights

Respondents Valuation of Patents with Full Term - Results after Interviews Valuation of Patent Less than DM 100,000 DM 100,000 399,999 DM 400,000 999,999 DM 1 - 5 million DM 5 - 10 million DM 10 - 20 million DM 20 - 40 million DM 40 - 80 million More than DM 80 million Total 203 200 154 129 28 16 15 5 2 752 27.0 % 26.6 % 20.5 % 17.2 % 3.7 % 2.1 % 2.0 % 0.7 % 0.3 % 100.0 % Cases Percent
Note: the survey also produced data for 20 other patents which were assessed by respondents of our written survey to be worth more than DM 5 million. In these cases, no additional information was available.
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Patent Value
Correlates of patent value - the right hand side, explaining variables
1. Patent Scope : The scope of a patent is difficult to assess and measure - use of Lerners approach (number of four digit IPC) 2. Citations Received from Subsequent Patents : Looking at the frequency of citations that a particular contribution receives from subsequent patents. 3.References to other Patents (Backward Citations): A relatively small scope and low monetary value should characterize a patent whose examination report contains a large number of backward citations.
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Patent Value
Correlates of patent value - the right hand side, explaining variables 4. References to the Non-Patent Literature: Patents may be based in part or fully on new scientific knowledge. A relatively high number of references to the scientific literature may therefore indicate patents of relatively high value (PATDPA database) 5. Family Size : The size of a patent family (measured as the number of jurisdictions in which a patent grant has been sought) and the survival span of patents are highly correlated (Putnam and Lanjouw) 6. Outcome of Opposition Cases : On average, 8% of all EPO patents are opposed, and 14 % of the patents thus attacked are revoked. However, opposition rates and outcomes for EPO patents vary considerably. Leading companies have their patents opposed far more often than on average. (van der Drift 1989)
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Patent Value
Correlates of patent value 6. Opposition annulment cases
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Patent Value
Data The 1977 sample of applications Of the total of 57 782 patent applications (comprising patents renewed to full term), only 24 116 (41.7%) were initially granted. Since obtaining patent protection in other than the own jurisdiction is expensive, applicants will seek international protection only for their more valuable inventions (Putman 1991). Foreign patents should examination process. be more likely to pass the
Patents owned by non-German applicants are attacked less frequently than German patents (exception: US Patents). 13.3% of the German-owned patents are renewed to full term, while non-German are more often renewed to fullterm.
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Patent Value
Data The 1977 sample of applications
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Patent Value
Data Descriptive statistics
Focus on the 11 475 patents that were initially granted. Description of the mean values and standard errors for the 6 indicators according to different groups of patents. Study of the following table:
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Patent Value
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Patent Value
Data Descriptive statistics - Results
Patents which defeated opposition turn out to differ with respect to most indicators from patents that were held invalid or never opposed. Comparison column 3 & 4: unopposed full-term patents receive more citations, contain more references and are part of larger patent families than unopposed patents which were not renewed to full term (same result holds for a comparison of patents that were opposed and subsequently upheld).
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Patent Value
Focus on the moments, range and distribution of the scope and citation measures.
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Patent Value
Data Descriptive statistics - Interpretation Most of the indicator variables have skew distributions, with the mean always larger than the median. Citation counts both in the German and the European systems are spectacularly low by USPTO standards. 2 potential reasons: 1. Both the EPO and the DPA systems contain fewer applications and granted patents/year than the USPTO. 2. Best-mode practice in the USA: applicants have to provide an exhaustive list of patents that could be considered prior art. In Europe, all of the citations in the patent report come from the examiner, not the applicant. 3. The examiners approach to referencing prior art is more conservative and targeted in Europe than in the USA.
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Patent Value
Estimation multivariate specification Combination of the above indicators to model the mean value of patent rights as a function of observables Complex: no point estimates but only lower & upper bounds => use of an ordered probit framework. That means: - Full-term patents delineated by a lower bound, , the parameter to be estimated - is, at the same time, the upper bound for the value of patents which were not renewed to full-term. The econometric model starts by specifying the logarithm of patent valuation ln(V) as the sum of a linear function Xb of (ex post) observables and of an error term e
ln(V)= Xb + e
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Patent Value
Estimation multivariate specification Assumption that : 1. the error terms are distributed i.i.d 2. the normality of the error terms such that the probability of observing a patent in the value interval between 1 and 2 (where 2 > 1) is given by (ln(2)/ - X/)- (ln(1)/ - X/) where is the standard error of the disturbance and (.) is the cumulative standard normal distribution. The log-likelihood contribution for patents for which we observe finite interval bounds is given by: (1)
lnLA(, , /X) = ln((ln(2)/-X/)- (ln(1)/-X/))
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Patent Value
Estimation multivariate specification For observations with value greater than some known amount , but no data on a potential upper bound, the log-likelihood is: (2)
lnLB(, , /X, ) = ln(1-(ln()/ - Xi/))

Those patents that were renewed to full-term with unknown valuation contribute
(3)
lnLC(, , /X) = ln(1-(ln()/ - Xi/))

Finally, the log-likelihood contribution of those 9349 patents that were not renewed to full-term is given by:
(4)
lnLD(, , /X) = ln((ln()/ - Xi/))

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Patent Value
Estimation Results
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Patent Value
Estimation Results The scope variable is insignificant in these specifications. All other variables turn out to have some explanatory power. While references to the scientific literature are informative about the patents value, the average effect across all technology areas is smaller than for backward citations of patents. The indicators summarizing the outcome of the opposition is large and highly significant. A patent which has defeated opposition in the opposition procedure is considerably more valuable than a patent that was never attacked.
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6.4. Valorization & Securitization
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Patent Valorization & Securitization

Economic value of patents is increasing Starting observations: IPR generate competitive advantage Estimated value of patents portfolio has increased in recent years IPR increasingly used in firms valuation Accenture Survey 2003: Managing Intangibles is a CEOs Top 3 priority
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Intellectual Assets as Management Resources
Brand Power
Capital Product Human Resource Information KnowHow Technology
When These Management Resources Are Rearranged
Tangible Assets Plants, Equipment, Credit, etc
Intangible Assets Goodwill
Intellectual Assets Off Balance Sheet

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On Balance Sheet
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Firms exploit patent value through multiple channels
Embedding protected inventions in new products/processes/services Additional revenues from outward licensing Access to new technologies (through inward or cross-licensing)
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Contribution of patents to economic value is hidden
Although critical, IP is under-valued Traditional wall between research labs and business needs leeds to unexploitability of inventions e.g. Dow Chemical: 55% utilization rate of patents in 2002 Investors need reliable information on patent value Today, few companies report on the value of their patents Multiple ways of evaluating patents, but no consensus
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Current Financial IP Valuation Methods
Three broad categories:

Market approach: Valuation is determined by looking for similar transactions involving similar IP. But there is no dynamic market in the industry for the type of IP valuation and so there will not be many cases to which the purposed transaction can be compared. Cost approach: Valuation is determined by what it would cost to substitute or design around the intellectual property protection. Unless patent is narrow in scope, it may not be possible to design around without infringing. Income approach: Valuation is determined from anticipated revenue which is discounted at some rate according risk factors which could affect revenue projections. This provides net present value (NPV). Most common method used for valuations prior to securitization
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Securitization of IP Rights
Just as the electronics industry was formed when the vacuum tubes were replaced by transistors, and transistors were then replaced by integrated circuits, the financial services industry is being transformed now that securitised credit is beginning to replace traditional lending. Like other technological transformations, this one will take place over the years, not overnight. We estimate it will take 10 to 15 years for structured securitised credit to replace to displace completely the classical lending system -not a long time, considering that the fundamentals of banking have remained essentially unchanged since the Middle Ages.
Lowell L Bryan
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Defining Securitization
A device of structured financing where an entity seeks to pool together its interest in identifiable cash flows over time, transfer the same to investors either with or without the support of further collaterals, and thereby achieve the purpose of financing. Though the end-result of securitisation is financing, but it is not "financing" as such, since the entity securitising its assets it not borrowing money, but selling a stream of cash flows that was otherwise to accrue to it. Simplest form: Conversion of assets or cashflow into marketable securities Asset-Backed Securities (ABS) Origins: GNMA (1970s), Chrysler Financial Corp. (1981) Estimated market size: $584 billion
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IP Valuation and Securitization
Total asset value of patents worldwide: $1 trillion Revenues from licensing in the US increased by 700% between 1990 and 1998 to more than $100 billion IP-backed securitization is recent Origins:
David Bowie (1997) Dow Chemical (1992)
Recent hype in the field: Companies raising money by selling bonds back from the income they receive from their IP licensing.
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Advantages of IP-backed Securitization A company which securitizes its IP can obtain a greater amount of revenue than from a loan based on that future revenue Capital is obtained immediately, rather than waiting for royalties to trickle in over time Securitization sets up a fixed interest for the duration of the deal Securitization is non-recourse to the originator & irrevocability of the bond sale becomes an insurance policy for the value of future royalties Taxes do not have to be paid on the amount raised by the securitization Owner retains ownership of the IP Credit rating on securitization can be higher than the originators rating because of the quality of the assets, credit enhancement, and the isolation of the assets in a bankruptcy-remote entity
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Types of IP-backed Securitization
Loans collateralized by title to a patent

the lender loans at a loan to value ratio of between 25-30% of the appraised value of the asset (depending on the asset quality, creditworthiness of the asset holder, and other risk factors) The asset holder is happy because he has raised debt capital against the value of his asset without relying on the credit of his firm
Securitizations of cash flows emanating from patent based licensing agreements

The patent is the underlying asset that generates cash flows as defined by licensing agreements. The securitizations can either be asset backed (based on guaranteed payments as defined by a licensing agreement) or future flows (based on projected royalty streams, generally riskier) The structure for this type of deal is a special purpose vehicle (SPV) used in other asset backed securities which functions as a legal entity
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Process of IP-backed Securitization
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Why companies are hesitating?

Lack of success stories so far: need a number of well publicized and successful - cross border transactions for global IP securitization to truly take off For multinationals with IP assets all around the world, IP Securitization would not work in all countries Requires a lot of work to develop the documentation that would comply with everyone's laws as well as provide the ability to perfect those security interests in a particular country and the US
Nevertheless, IP assets can be the strongest assets in a corporate portfolio, they're a potential gold mine Recent examples
Matsushita securitized patents under new Japanese METI system Candies: bond pooling & selling income from its logos and licensing
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Key questions:
Who has the actual ownership of the asset (co-ownership)? What if the patented technology becomes quickly obsolete? If the debtor can grant licenses to the IP, would that significantly diminish its value by transferring the ownership? What related assets (IP Rights) may be needed to exploit a particular piece of IP and are they protected? e.g. Coca-Cola: You can securitize the brand name, but in reality that would not be enough because if a lender would ever have to foreclose, the name Coca Cola without the underlying trade secret formula is going to have diminished value
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Conclusions
Markets for technology offer social & economic benefits

Patent exploitation requires well-functional technology markets Efficient technology markets increase transfers of technology Better diffusion of knowledge Technology transfer increases in developed economies Shift toward more open innovation processes Universities encouraged to enter patent markets & license out
Intermediaries help technology markets to function smoothly

Public technology licensing offices E-Market places for technology Private firms offering advice & linking technology buyers & sellers All help to improve market efficiency & reduce transaction costs
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Conclusions
Public institutions have an important role to play

Improving administration of patent systems to bring
Better enforceability of patents Faster generation of IP Rights (faster granting procedure)
Providing information to markets

Licensing markets requires timely information about patented inventions IP valuation tools and methods
Educating and training

Make inventors aware of available options to protect & license inventions
Supporting patent management in the public sector

Foster technology transfers from public research organisations Encourage & facilitate generation of IPR by public research institutions
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Conclusions
Need for improved data collection, diffusion & analysis

Under what circumstances are patents used? When are patents licensed? When are patents used to block competitors? When are patents used to negotiate access to 3rd-pary technologies? How do licensing strategies affect perceived value of patents? How is the value of a patent related to other patents? What roles do patents play in technology markets? Which are the barriers for the development of technology markets?
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The Theory of Innovation & Entrepreneurship

Prof. Bruno van Pottelsberghe Ass. Nicolas van Zeebroeck

S6.2. The Value of Patents

S6.3. The Determinants of Patent Value

S6.4. Financial Valorization and Securitization

6.1. The cost of patenting

Van Pottelsberghe SBS S6

Table 1. EPO, USPTO and JPO: Basic figures, 2003

Why? to expensive? Not all domestic patents? different patents?

Van Pottelsberghe SBS S6

Table 1. EPO, USPTO and JPO: Basic figures, 2003

Market size and patent filings, 2003

Van Pottelsberghe SBS S6

Market size and geographically designated patent filings, 2003

Van Pottelsberghe SBS S6

Not all patents are the same

Van Pottelsberghe SBS S6

Market size and geographically designated filings of claims, 2003

Van Pottelsberghe SBS S6

Van Pottelsberghe SBS S6

Cost effect in the literature?

Van Pottelsberghe SBS S6

The cost of patenting

In house or outsourced + transaction cost

Roland Berger, 2005 Survey

Comparative cost structure of patent applications and maintenance

20,175 6,575 3,065 1,541

Van Pottelsberghe SBS S6

Patent costs per claim in the three offices

4000 3000 2000

1000 0 Process costs

Process and translation

Process and external serv. Cumulative costs

TOTAL 10 years TOTAL 20 years

European and Japanese costs relative to the US

3.4 8.4 1.7

2.2 5.3 1.9

3.4 10.0 3.5

Van Pottelsberghe SBS S6

Millions of claims filed vs. process cost per claim

Van Pottelsberghe SBS S6

9,0 8,0 7,0 6,0

5,0 4,0 3,0 2,0 1,0 0,0

Van Pottelsberghe SBS S6

Qualitative indicators in the three regional offices

Total number of claims filed Filings per examiner

7.9 Million 96.9 47.8 2,235

Grants per examiner

Van Pottelsberghe SBS S6

Concluding Remarks on costs

Concluding Remarks on costs

Van Pottelsberghe SBS S6

Toward a European Community Patent?

European Community Patent (in the future?)

European Patent Enforcement in Central European Patent Court Death

6.2. The Value of Patents

6.2. The Value of Patents

Van Pottelsberghe SBS S6

Proxies or Indicators only

6.2. The Value of Patents

Guellec & van Pottelsberghe

6.2. The Value of Patents