Patents as Options: Some Estimates of the Value of Holding European Patent Stocks

Ariel Pakes

NBER Working Paper No. 1340 (Also Reprint No. r0782)
Issued in April 1984
NBER Program(s):Productivity, Innovation, and Entrepreneurship

In many countries holders of patents must pay an annual renewal fee in order to keep their patents in force. This paper uses data on the proportion of patents renewed, and the renewal fees faced by, post World War II cohorts of patents in France, the United Kingdom, and Germany, in conjunction with a model of patent holders' renewal decisions, to estimate the returns earned from holding patents in these countries. Since patents are often applied for at a nearly stage in the innovation process, the model allows agents to be uncertain about the sequence of returns that will be earned if the patent is kept inforce. Formally, then, the paper presents and solves a discrete choice optimal stochastic control model, derives the implications of the model on aggregate behaviour, and then estimates the parameters of the model from aggregate data. The estimates enable a detailed description of the evolution of the distribution of returns earned from holding patents over their life spans,and calculations of both; the annual returns earned from holding the patents still in force (or the patent stocks) in the alternative countries, and the distribution of the discounted value of returns earned from holding the patents in a cohort.

download in pdf format
   (708 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1340

Published: From Econometrica, Vol. 54, No. 4, pp. 755-784, (July 1986). citation courtesy of

Users who downloaded this paper also downloaded* these:
Griliches, Pakes, and Hall w2083 The Value of Patents as Indicators of Inventive Activity
Pakes and Schankerman The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources
Griliches Patent Statistics as Economic Indicators: A Survey
Schankerman and Pakes w1650 Estimates of the Value of Patent Rights in European Countries During thePost-1950 Period
Hall, Jaffe, and Trajtenberg w7741 Market Value and Patent Citations: A First Look
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us