Dissertation Abstract

Patent data have long been used as an indicator of the output of innovative processes. While simple patent counts are publicly available and easily obtained, the private and social value of innovations protected by patents varies widely, making patent counts too noisy an indicator of innovative output in many cases. In finding good measures of the value of patents, it is essential to observe that patenting is an optimizing process. The value of holding a patent lies in the monopolistic rights that a patent grants the patentee of making, using or selling an invention, whereas to obtain and maintain patent protection, the inventor has to pay the cost of filing the patent application as well as the renewal fee. That is to say, the inventor makes a binary decision of whether to file a patent application by comparing the expected private value of the patent, which may be known only to him, and the application cost, which is publicly observable. Similarly, he decides whether to keep a patent in force by comparing its private value known to him and the renewal fee, and drops the patent when the cost of renewal exceeds the value of the patent. Therefore, observations on the countries where the patent application is filed as well as the length of time that the patent has been kept in force, together with filing and renewal costs, can reveal a lot about the private value of the patent.