Essays on economic valuation of patents in India

Abstract

The valuation of Intellectual Property (IP) plays an essential role in the technology market. For instance, IP, including patents, are being traded more regularly between companies. Keeping the patents' significance as a central deducing force of this work, we endeavour to estimate patents' value in the Indian setting from the inventors’ perspective. Various notions of value are found in the literature with a different perspective (legal, economic, strategic, accounting, and taxation) depending on the valuing agency's specific context and objective. The patent's value can be perceived as the value of the underlying technology that a patent protects. Patent rights' value may also refer to the incremental value above any profit that can be captured without patent protection (Arora et al., 2008). One of the difficulties we face while estimating the monetary value is the asymmetric information on the patent's marketability (Lemley and Myhrvold, 2007), and dependence on highly idiosyncratic details (Cohen et al., 2000). The patent valuation studies are arranged into two classes, i.e., qualitative, and quantitative. The former endeavours to appraise the strength of invention through patents due diligence which is an in-depth investigation of patent’s characteristics to determine the firms' most valuable innovations. The qualitative studies identify the factors that contribute towards the valuable patents. The quantitative methods estimate a single patent's value (patent portfolio) in monetary terms. Over time, scholars have developed various methods to estimate patent value. They have used litigation, renewal decision, and citation information as a proxy of value indicators in the absence of any direct measure of patent value. Further, as most patent systems levy renewal fees, the patentee's renewal decision is also tied to patent rights' value (Sullivan, 1994). The patent renewal data provides information on the private value of patent rights. The renewal fee is charged annually from the patentee by the respective patent office to keep a patent enforced for an additional year. The failure to renew cancels the exclusive rights of the patentee. Thus, an assignee/patent holder will pay the renewal fee for an additional year when the returns from holding the patents exceed the renewal cost. In this thesis, we use renewal information to estimate the private value of patents in India. India's patenting activities has increased significantly over time; for example, in 1995-96 the total domestic patents filed were 1606, and non-resident filing was 5430 at Indian Patent Office (IPO). In 2018-19, the patent applications are 50,659, which is 5.9% higher than 2017-18. (IPO Annual Report, 2018-19). However, the increasing patenting activity does not capture the quality of the invention, which is the focus of this doctoral dissertation. Based on the above discussion, the thesis has the following four objectives: 1) To estimate the determinants of survival of a patent filed at IPO. 2) To identify valuable technology at the disaggregated level. 3) To estimate the monetary value of expired patents. 4) To estimate the forward value of non-expired (enforced) patents.