Using the patent term changes in assessing the evolution of patent valuation from filing to maturity

The authors argue that the patent term change introduced in Trade Related Aspects of Intellectual Property Rights (TRIPS) in the USA inadvertently offered a metric of self-valuation of patents at the time of filing, affirming the ability of Drugs and Chemical patents to offer greater R&D incentives than other technology fields. As renewals also offer a metric of self-valuation, the authors find that upon renewal Computer patents are found to offer greater R&D incentives than Drugs and Chemicals. The purpose of this paper is to inquire as to why Computer patents are considered as more valuable in the post grant period, even though they were not considered as valuable upon filing. The authors advance the idea that patents can increase in value if encompassed in a patent portfolio.

The authors employ the introduction of the TRIPS agreement in the USA. In order to facilitate the move to TRIPS, the USPTO (unexpectedly) allowed applicants who filed prior to June 8, 1995 a patent length that was equal to the maximum of two regimes. Therefore, applicants that filed before the deadline were given a possible small extension of their patent’s time length. The authors use this change and renewal data to infer firms’ self-valuation of patents. For this reason, the authors acquire information for all utility patents that were filed around June 8, 1995 data project.

The authors offer an additional explanation that is related to the increasingly commonplace build up of patent portfolios: patents can increase in value if encompassed in a portfolio. Such portfolios are bundles of patents whose means to an end lays in their strength in numbers. As Lanjouw and Schankerman (2004) note, when a patent is added to a portfolio the cost of defending a technology against infringement allegations decreases. To rephrase, a patent is regarded as the additional foot-soldier who aids the firm, arm-in-arm, in defending its technological territory and in fulfilling its strategic goal.

The originality stemming from the paper is that policy makers that aim to tackle patent proliferation should not focus their attention to individual patents. Instead, they should target policies toward patent portfolios, because they provide the means of endowing patents with the extra weight that makes filing and renewing irrelevant patents worthwhile.