NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Patent Protection: Of What Value and for How Long?

Jean Olson Lanjouw

NBER Working Paper No. 4475
Issued in September 1993
NBER Program(s):   PR

Empirical estimates of the private value of patent protection are found for four technology area - computers, textiles, combustion engines, and pharmaceuticals - using new patent data for West Germany, 1953-1988. Patentees must pay to keep their patents in force. A dynamic stochastic discrete choice model of optimal renewal decisions is developed incorporating both learning about an innovation and the market as well as the possibility of infringements. The evolution of the distribution of returns over the life of a group of patents is calculated for each technology using a minimum distance simulation estimator. Results indicate that learning is completed within 6 years, that obsolescence is rapid, and that the distributions of patent value are very skewed. Research and development (R&D) expenditures are calculated and patent protection as an implicit subsidy to investment in R&D discussed.

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Document Object Identifier (DOI): 10.3386/w4475

Published: The Review of Economic Studies, Vol 65 (1998): 671-710.

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