A Dynamic Stochastic Analysis of International Patent Application and Renewal Processes

This paper formulates a dynamic stochastic model to examine the joint patent application and renewal behaviors under an international patent-protection regime. The framework makes it possible to utilize both the cross-sectional (multi-country application) and the time-series (patent renewal) dimensions of available international patenting data to estimate the private value of patent protection, and allows us to distinguish more aspects of the evolution of patent returns throughout patent lives. The evolution dynamics of the value of European patents in pharmaceutical and electronics industries is examined. Estimation results indicate that pharmaceutical patents are endowed with higher initial returns, thus their owners tend to seek patent protection in more countries than electronics patent holders. However, their value depreciates substantially faster than the value of electronics patents, and consequently they have lower renewal rates and shorter lives than electronics patents. JEL Classifications: O34