The Importance of Patent Scope: An Empirical Analysis

Josh Lerner

RAND Journal of Economics, 1994, vol. 25, issue 2, 319-333

Abstract: This article examines the impact of patent scope on firm value. I develop a proxy for patent scope based on the International Patent Classification scheme. Using a sample of 535 financing rounds at 173 privately held venture-backed biotechnology firms. I show that the breadth of patent protection significantly affects valuations. A one standard deviation increase in average patent scope is associated with a 21% increase in the firm's value. Broad patents are more valuable when substitutes in the same product class are plentiful, a finding consistent with theoretical suggestions.

Date: 1994
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