Patent Renewals as Options: Improving the Mechanism for Weeding Out Lousy Patents

Marc Baudry and Béatrice Dumont

Review of Industrial Organization, 2006, vol. 28, issue 1, 62 pages

Abstract: This paper examines how patent renewal fees may be restructured to discourage low-value patents with the goal of reducing the burden on patent offices without unduly impairing innovation incentives. We depart from Pakes’ (1986, Econometrica, 54, 755–784) real-option model by moving to an approach involving binomial trees, widely used in valuing financial options. The new approach has the advantage of allowing the dynamics of the patent rent to follow a wide range of stochastic processes. The model is estimated using French data from 1970 to 2002. Policy simulations cast some doubt on the relevance of the current schedule of renewal fees. An alternative fee schedule is suggested. Copyright Springer 2006

Keywords: patent renewal; real-option model; C51; O31 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:28:y:2006:i:1:p:41-62

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DOI: 10.1007/s11151-006-0001-0

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